There is a lack of a US supply chain for electric vehicle battery materials. This is true in a lot of different ways. There is a metal from the Democratic Republic of the Africa. The nickel from Indonesia. There is a substance called Latin Americanlithium. There is a critical material for which this isn't the case. The material is not a rare metal. It is an arrangement of six carbon atoms that can be found anywhere in the world. Synthetically, it can be made from waste oil. This approach is believed to be the best for long- lasting EV batteries.
Of all the critical materials that go into batteries, the US is least capable of producing its own EV-quality graphite. All of it is made in China. Last year, when the federal government was considering allowing exemptions for tariffs on Chinese products, domestic automakers protested. The US couldn't get it because it didn't invest in doing so.
China leads on electric vehicles. Half of last year's total sold in China was by the country. Backed by aggressive government policies, Chinese investors have spent the last decade building up the ability to extract raw materials and make batteries for electric vehicles. The EV market is expected to bring in $9 trillion between now and 2030.
Policymakers in the US want to be involved in the action. The Inflation Reduction Act, which passed through Congress last week, contains new subsidies for US drivers who want to buy an EV. The old program had a cap on tax credits. There are new circumstances. The particulars of the car can affect how much credit you get. In order for a vehicle to qualify, it has to be manufactured in North America and made up of raw materials that are processed and refined in the US or in countries with friendly trade relations with the US. Not in China, that's what I mean. The bill attempts to stand up a US led supply chain for the next generation of vehicles.
It is going to be difficult. The Internal Revenue Service will determine which vehicles qualify for the credits once the legislation is signed. The Alliance For automotive innovation, a trade group that represents most global automakers in Washington, says the current stringent rules will disqualify 70% of the EV currently on the US market. The full credit would only be given to 11,000 vehicles, according to an analysis of the bill.
That is not a bad thing according to some people. Proponents of the restrictions say the country doesn't need tax credits to convince people to buy battery-powered cars in an environment where the supply is crunched. The subsidies are an attempt to change the way cars are built. With investments in critical materials producers through the Defense Production Act, last year's infrastructure bill, and last month's bill to stimulate a domestic Semiconductor industry, some hope that aggressive policies can get the supply chains to a point where automakers and other The US is doing the same thing as China did a long time ago.
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