Biden Administration Faces Backlash Over Loosening Restrictions on Federal Electric Vehicle Tax Credits

The Biden administration’s decision to loosen looming restrictions on federal electric vehicle tax credits has sparked controversy and drawn the ire of China hawks and mining representatives. The policy change, which allows carmakers to continue using Chinese graphite in EV batteries until 2027 without losing eligibility for tax credits, has been criticized as giving a “blank check” to China.

Rarefied graphite, a key material for EV batteries, has become a focal point of the debate. The federal government’s initial rules in 2022 aimed to disqualify EVs containing Chinese graphite from tax credits starting in 2025. However, with China producing the majority of refined graphite used in EV production, concerns were raised about the feasibility of sourcing non-Chinese graphite.

The $61 billion EV industry, which is expected to grow between 20% and 30% this year, relies heavily on the federal tax credit policy to drive sales. The policy has been popular among consumers, automakers, and car dealers, but the use of Chinese-sourced battery materials has become a contentious issue.

Critics of the policy, including American graphite miners and Senator Joe Manchin, have voiced their opposition, calling the decision “outrageous and illegal.” They argue that the policy undermines efforts to secure domestic supply chains and create American jobs in the EV industry.

As the debate continues, domestic companies are exploring options such as recycling graphite and mining new sites to meet demand. However, unless the government extends the timeline again, automakers will have to find alternative sources by 2027. There are also concerns that a potential reelection of Donald Trump could lead to stricter limits on foreign materials sourcing.

American graphite producers are lobbying for the re-imposition of Trump-era tariffs on Chinese graphite to incentivize domestic investment in the EV battery supply chain. The North American graphite industry is seen as vulnerable, and industry representatives are calling for action to counter China’s anti-competitive practices.

Overall, the decision to loosen restrictions on federal electric vehicle tax credits has sparked a heated debate between proponents of domestic sourcing and those advocating for a more global approach to the EV supply chain. The outcome of this debate will have significant implications for the future of the EV industry in the United States.