March 2023
Since the Biden administration approved the Inflation Reduction Act (IRA) in mid-2022, companies have announced an estimated US$35bn of investment in the domestic EV supply chain. The IRA is undoubtedly boosting local manufacturing of batteries and electric vehicles through generous tax incentives.
Under the IRA, EVs will be eligible for a US$7,500 federal tax incentive. To qualify for the tax credit, a significant portion of critical materials used in the EV batteries will have to be sourced from the US or a free-trade partner. Australia and Chile, two major lithium-producing countries, already have a free-trade agreement with the US. Multiple stakeholders, including Japanese and Korean automakers and battery producers, have complained about the ‘unclear and ambiguous’ IRA conditions. The US Department of Treasury announced that more guidance on the requirements will be issued in March 2023. Producers remain hopeful that lithium mined in non-FTA countries (such as Argentina) but processed in FTA-countries (Canada or Australia) will qualify for the credit.   Domestic Mining and Refining