Team Biden shows its cards on EV subsidies

The White House is tempting fate with its plan to implement strict, intricate legal mandates on EV material sourcing, Axios‘ Jael Holzman and Ben report.

 Driving the news: The Treasury Department just released its long-awaited interpretation of those mandates in last year’s big climate law.

The guidance “provides increased clarity and certainty to manufacturers,” a senior Treasury Department official told reporters.

Why it matters: The rules will determine how many models meet complex eligibility requirements for consumer subsidies of up to $7,500 per vehicle.

Yes, but: Risks abound, including political blowback from lawmakers who say team Biden isn’t doing enough to curb Chinese influence on the U.S. economy.

 Catch up fast: The climate law set escalating percentages for battery components sourced from North America; minerals sourced or processed in the U.S. or from free-trade partners; or recycled in the U.S.

It also requires final vehicle assembly in North America and sets price limits — $80,000 for pickups and SUVs, $55,000 for sedans — on eligible vehicles.

Quick take: A few initial conclusions …

 Treasury is prioritizing EV deployment over industrial policy. The document provides leeway in several areas, including a definition of “free-trade deal” that will open doors to more global cooperation (i.e. imports).

 They’re still not done defining how battery parts and minerals linked to Chinese firms and individuals will be barred from qualifying vehicles for future years, despite a recent action on microchips indicating that might eventually happen.

• Details on freezing out materials from a “foreign entity of concern” in eligible vehicles are TBD in a future regulatory process.

 Confusion remains certain. More info is always better. But combining the free-trade deal definition with question marks on China could create marketplace chaos where cars qualify, only to be disqualified later.

 Get ready for attacks. West Virginia Senator Joe Manchin (D), who demanded the sourcing rules in exchange for his vote, says he may sue Treasury over how it’s implementing the EV credit, arguing they’re doing an end-run around the requirements.

The bottom line: Officials hope the subsidies — alongside manufacturing incentives and other pro-EV programs — will boost deployment and curb reliance on China, a dominant player in battery materials.

• They acknowledge it initially cuts the number of vehicles eligible for credits in order to draw supply chains and manufacturing to the U.S.
• “However, we believe these requirements will significantly increase the number of vehicles made and sold in the U.S. over the next decade,” the Treasury official said.