Biden's EV tax credit guidelines has loopholes that benefit Chinese car companies

The Biden administration's implementation of final guidelines for its electric vehicle (EV) tax credit on Friday has carve outs that benefit Chinese car companies.

The initial guidelines aimed to prevent companies from claiming the EV credit for vehicles constructed with materials sourced from "foreign entities of concern," notably China. However, some carve outs were still included in the law. 

These restrictions have significantly limited the options for consumers to qualify for the tax credit, with only 20% of electric models meeting the criteria.  

The tax credit program offers up to $7,500 for the purchase of a new EV. 

However, the guidelines allow a short-term exemption for graphite and synthetic graphite, which are vital materials for lithium-ion batteries. This exemption has been crucial for domestic carmakers who mostly use graphite from Chinese companies. 

This exemption has angered many who argue that China is poised to benefit drastically. Senator Joe Manchin (D) from West Virginia criticized this move by the Biden administration, stating that the “Treasury has provided a long-term pathway” for countries like China “to remain in our supply chains.” 

“It’s outrageous and illegal,” he said. 

Prior to being implemented, the guidelines faced lobbying from major automakers, including Tesla, General Motors, and Toyota. Critics have pointed out that the restrictions will severely limit efforts to transfer towards EVs, as American battery suppliers may take years, or even decades, to catch up with their Chinese counterparts, as reported by Politico. 

The Biden administration has emphasized its commitment to transitioning towards electric vehicles as part of its broader strategy to address climate change. John Podesta, senior White House advisor for climate change, reaffirmed this commitment, stating, “The direction we’re headed is clear—toward a future where many more Americans drive an EV or a plug-in hybrid and where those vehicles are affordable and made here in America.” 

The urgency to implement these restrictions will also make it harder for them to be repealed should President Biden lose reelection in November.