The administration of U.S. President Joe Biden has released long-awaited rules designed to block electric-vehicle manufacturers from sourcing battery materials from China and other foreign adversaries, while giving automakers some flexibility to comply with the new mandates.
The guidelines, which were required as part of a deal to extend the $7,500 tax credit through Biden’s signature climate law, establish a 25% ownership threshold for a company or group to be classified as a foreign entity of concern (FEOC), government speak for businesses or groups owned or controlled by U.S. geopolitical foes. The restrictions will apply to battery components next year, then include suppliers of key battery raw materials, such as nickel and lithium, in 2025.
The definition has wide-reaching implications because starting in 2024, vehicles containing any battery components manufactured or assembled by FEOCs will no longer qualify for the tax credit. In writing the highly-anticipated rules, the Biden administration has tried to balance two competing agendas — weaning U.S. industry off of low-cost Chinese materials that dominate today’s supply chains, while still incentivizing EV adoption to combat climate change.