DETROIT, Oct 19 (Reuters) – U.S. lawmakers must give automakers operating in the United States more time to meet the required supply levels of battery minerals used in electric vehicles to qualify for federal tax incentives, said several industry executives on Wednesday.
The Cut Inflation Act, as currently written, requires automakers to source 50% of critical minerals used in electric vehicle batteries from North America or US allies. by 2024, rising to 80% by the end of 2026. Volkswagen (VOWG_p.DE) Americas Chief Executive Pablo Di Si said the industry cannot move that fast.
“We all source from different parts of the world and change those long term contracts, you don’t do it overnight. We have 10, 15, 20 year commitments,” Di Si told Reuters. Auto conference events in Detroit.
Join now for FREE unlimited access to Reuters.com
Instead, U.S. lawmakers must create a more gradual process that stretches to 2030, he and Hyundai Motor Co (005380.KS) chief operating officer Jose Munoz told the Reuters event.
“When we saw the IRA we weren’t happy,” Munoz said in a separate interview, referring to the new law.
“We think it’s unfair,” he added, pointing out that none of the South Korean automaker’s electric vehicles qualify for the credit.
Hyundai will open a $5.5 billion electric vehicle factory in Georgia next week that will create thousands of jobs. Munoz said U.S. lawmakers should offer companies investing in the U.S. some type of waiver or longer transition period.
Automakers are trying to figure out how their vehicles will meet the requirements of the new law to be eligible for electric vehicle tax credits.
Signed into law in August by US President Joe Biden, the IRA contains incentives designed to help meet his administration’s goals of halving US carbon emissions by 2030 and reaching net zero emissions by 2050.
Under the $430 billion law, rules governing the current $7,500 electric vehicle tax credit aimed at persuading consumers to buy the vehicles will be replaced with incentives designed to bring more manufacturing of batteries and electric vehicles in the United States. National content requirements will increase over the next six years.
New restrictions on battery supply and critical minerals, as well as price caps and revenue caps, will take effect Jan. 1, potentially making all current electric vehicles ineligible for the full $7,500 credit. .
The details of the law are still being worked out, and the US Treasury is currently gathering feedback on how to implement the rules for electric vehicle tax credits.
“I don’t think you can transform mineral production and extraction in the next two to three years,” Di Si said Wednesday in Detroit. “You can’t change sources from Congo, China and other places within two to three years.”
VW America purchasing director Inga von Seelen told the Reuters conference on Tuesday that the German automaker should source battery materials from where they are available.
VW has a supply agreement for batteries from an SK Innovation (096770.KS) factory in the US state of Georgia and in August entered into a battery materials cooperation agreement with mineral-rich Canada, with the aim of securing access to lithium, nickel and cobalt.
In South Carolina on Wednesday to announce a $1.7 billion investment to build electric vehicles in the United States, BMW (BMWG.DE) CEO Oliver Zipse also criticized the new law, telling Reuters that ‘no region can be independent, especially for electric vehicle raw materials.
The United States “should have regulations that are not completely unrealistic”. He also warned that the new law could inhibit investment.
At least one legislator has been receptive to this argument. U.S. Senator Lindsey Graham, a Republican from South Carolina, said at Wednesday’s BMW event that the U.S. cannot make electric vehicle batteries solely from U.S. minerals and components.
On the other hand, Steve Carlisle, president of North American operations of General Motors Co (GM.N), said that the American automaker should be able to meet the requirements of the new law.
“We’re pretty well positioned,” he told the Reuters conference, citing the Detroit automaker’s four U.S. battery plants announced by the company and its raw material supply deals. “Overall, it’s very beneficial to help promote adoption (EV).”
Stellantis (STLA.MI) North American chief operating officer Mark Stewart told the Reuters conference on Tuesday that the automaker’s buying teams were working to meet the requirements of the new law.
“We have … very active conversations to secure capacity around the world, in free trade zones, to make sure we’re covered through 2030,” he said.
Stewart added that it’s crucial to offer vehicles that most people can afford.
“At the end of the day, if we can’t make this transition to what consumers can afford, the industry is going to collapse on itself,” he said. “We need to find a way to bring affordable technology into the equation.”
Join now for FREE unlimited access to Reuters.com
Reporting by Ben Klayman in Detroit Additional reporting by Joseph White and Paul Lienert in Detroit and David Shepardson in Spartanburg, SC Editing by Matthew Lewis
Our standards: The Thomson Reuters Trust Principles.