Ford

Ford wants the U.S. government to be more lenient on claims for tax credits for electric vehicles | Rare Techy

Rare TechyNovember 24, 2022

1 5 minutes read

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Ford wants the U.S. to cut some slack in deciding whether electric vehicles qualify for the new EV tax credit. Read on to see what’s going on here.

Some background

Rare earth minerals are a big deal. By mining rare earths, we can then obtain the rare earth elements needed for renewable energy, mobile devices and the Internet of Things. All of these items work together to automate many tasks that used to be done manually – making life more convenient in general. In addition, such green technology helps reduce pollution and combat climate change. Although neodymium is the most popular rare earth element in the cleantech industry due to its production of electric motors and generators, and 16 other elements used by the military, hospitals, etc., there are many life and death industries. which use these minerals.

And they are important before you consider other mineral materials for batteries. Lithium, cobalt and other materials are something that the growing electric vehicle industry simply cannot do without.

However, there is one big potential problem: China has been the largest supplier of rare earth elements and has threatened to ban them from countries that disagree with its policies. Most recently, it threatened the United States, but in the past, Japan was also a victim of this tactic.

“Will rare earths become a counter-weapon for China to counter the pressure that the US has applied for no reason? The answer is not a mystery,” the national newspaper reported in 2019. “Undoubtedly, the US side wants to use the rare earth products exported by China to oppose and inhibit China’s development. The Chinese people will never accept this!

While the dreaded rare earth element shortage did not materialize in 2019, recent events have many worried that it may soon. The conflict over Taiwan has seen tensions rise. The territory has been contested since 1949, when the civil war ended, but is now a major concern. Although China is currently run by a democratic government, China seems interested in taking over. The recent issue has gotten so out of hand that President Biden was forced to answer questions about it during a town hall. If the mainland Chinese government tries to take over Taiwan by force, according to Biden, the US is committed to helping Taiwan, which could lead to serious conflict or even war between China and America.

Tensions have appeared to be easing recently, but Taiwan’s status is not the only sore point in US-China relations that could lead to Xi Jinping pulling the rare earth and battery minerals card. The South China Sea, Hong Kong protesters, and various other disputes and issues may well threaten themselves or the actual curtailment of rare earths and cleantech materials.

Inflation Reduction Act

So it should come as no surprise that the US government has taken steps to reduce its reliance on key cleantech minerals from China. As Zach Shahan, a manager here, points out in an excellent article, one of the main problems is that “foreign entities of concern” cannot provide the battery minerals for the car if the buyer wants a tax credit/rebate. The main language of the legislation can be found on page 390 of the act and it states:

“Omitted items. In point 2 of this section, the term “new environmentally friendly vehicle” does not include:

“(A) any vehicle placed in service after December 31, 2024, from which any applicable critical mineral (as described in subsection (e)(1)(A)) contained in that vehicle’s battery has been extracted. , processed or recycled by a distressed foreign entity (as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 USC 18741(a)(5)), or

“(B) any vehicle placed in service after December 31, 2023, for which any component contained in the battery of such vehicle (as described in subsection (e)(2)(A)) is manufactured or assembled by an applicable foreign entity (such is defined).

While it would be ideal to solve this problem by simply buying American-made products, the market for these goods is not yet booming. Currently, China and Russia dominate this field, with China having a stronger influence than Russia. Additionally, it can take years to create mining and processing sites for everything that goes into batteries.

While this means short-term pain for the market, I have written several articles on new mineral trades in recent months. Canada, Australia and other friendly countries will increase the production of cars not only for America, but also for Europe.

Ford still isn’t happy about it

In one piece from the beginning of this month at Reuters, we learn that Ford is still not satisfied with the requirements of the new law.

“While Ford appreciates and supports the overall goal of the Act to strengthen the localization of battery manufacturing and the extraction and processing of critical minerals in the United States and with our trading partners and allies, an overly broad interpretation of this provision could undermine that same goal by making the Clean Vehicle Credit largely unavailable,” the company said. both to the federal government and the media.

Ford said it wants the Biden administration to ensure that joint ventures involved in the extraction, processing or recycling of critical minerals do not result in automatic vehicle exclusions. The company also said that no US-based organization should trigger the rules of foreign entities — regardless of who owns it. According to Ford, the de minimis aid standard must be applied for foreign entity reporting requirements. This is to ensure that consumers do not miss out on tax relief due to small traces of critical minerals inadvertently coming from the wrong places.

Ford is both right and wrong here

As for things like trace minerals from the wrong countries, Ford is absolutely right. If the company has made a good faith effort to get the minerals from the right places, the vehicles should get tax breaks. But that doesn’t mean an automaker should be allowed to continue skating when a dirty delivery gets its attention.

In joint ventures, we need to be much more careful about what holes we open. If we allow companies to create complicated paper trails to circumvent the requirements, we remain dependent on minerals from suppliers that can be turned against us.

Featured image: Ford’s future battery plant in Tennessee. Image courtesy of Ford.

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