🌱 What is the IRA’s goal?
The IRA incentivizes the domestic production of batteries. The act aims to reduce reliance on China for batteries and help reach Biden’s goal of having 50% of new vehicle sales in the U.S. be electric or hybrid by 2030. Under the IRA, “[v]ehicles can qualify for the full $7500 EV tax credit if they meet certain battery sourcing and production guidelines”. Moreover, producers can receive payouts in the form of advanced manufacturing credits from the U.S. Treasury.
🌱 What qualifies for tax credits?
To qualify for half the tax credit of $3750, the IRA “requires that 60% of the value of battery components be produced or assembled in North America in 2024”. This will be increased to 100% as of 2029. To qualify for the other half of the tax credit, “50% of the value of critical materials must be sourced from the U.S. or a free trade agreement country in 2024”. This will be increased to 80% from 2027 to 2032.
🌱 What qualifies for advanced manufacturing credits?
Per kilowatt-hour of capacity produced, battery cells qualify for a $35 advanced manufacturing credit and battery modules qualify for a $10 credit. Moreover, producers can be reimbursed 10% of the costs they incur for the production of electrode active materials (such as anodes and cathodes).
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