Most electric vehicles won't qualify for federal tax credit

DETROIT (AP) — A tax credit of up to $7,500 could be used to defray the cost of an electric vehicle under the Inflation Reduction Act now moving toward final approval in Congress. But the auto industry is warning that the vast majority of EV purchases won’t qualify for a tax credit that large.

That's mainly because of the bill's requirement that, to qualify for the credit, an electric vehicle must contain a battery built in North America with minerals mined or recycled on the continent.

And those rules become more stringent over time — to the point where, in a few years, it's possible that no EVs would qualify for the tax credit, says John Bozzella, CEO of the Alliance of Automotive Innovation, a key industry trade group. As of now, the alliance estimates that about 50 of the 72 electric, hydrogen or plug-in hybrid models that are sold in the United States wouldn't meet the requirements.

“The $7,500 credit might exist on paper," Bozzella said in a statement, “but no vehicles will qualify for this purchase over the next few years.”

The idea behind the requirement is to incentivize domestic manufacturing, build a robust battery supply chain in North America and lessen the industry's dependence on overseas supply chains that could be subject to disruptions.

Production of lithium and other minerals that are used to produce EV batteries is now dominated by China. And the world's leading producer of cobalt, another component of the EV batteries, is the Democratic Republic of Congo.

Though electric vehicles are part of a global effort to reduce greenhouse gas emissions, they require metallic elements known as rare earths, found in places like Myanmar, where an Associated Press investigation has found that the push for green energy has led to environmental destruction.

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