In an economic battle with China, the US has delivered a strong and clear mandate regarding the development of the American EV industry.
The Reduction Act is the containment of tax credits and incentives that will nurture US supply chain growth. This growth is expanding from the showroom floor to domestic battery manufacturers and the lithium production industry.
How the American EV production will be increased by the Reduction Act
The law restricts federal tax credit dollars for US EV buyers, which will encourage consumers to buy American EV production. This measurement is designed to decrease the demand for the import of Chinese batteries and grow the market for lithium battery production in the US.
Chris Berry, who is the president of US consultancy House Mountain Partners, has mentioned that “The IRA will go a long way towards the acceleration of building a more regionalized EV supply chain.
The article posted by Forbes stated how the Inflation Reduction Act could cause a crunch over lithium. This credits the latest law in launching several significant changes concerning federal subsidies for EVs.
Beginning in 2024, the $7,500 tax credit for EV buyers will apply to vehicles assembled in North America. A critical minerals portion used in batteries, lithium, will have to come from North America or a US trading partner. There are 20 free-trade partners available in the US, but only Australia and Chile have an accelerated lithium production industry.
The report also depicted that the critical mineral requirements settled by the IRA will be phased. 40% of critical minerals found in EV batteries will have to be extracted, recycled, or processed in the United States or by a US free-trade partner by the year 2024.
40% of critical minerals found in EV batteries are expected to rise shortly to stand at 80% by the end of 2026. Moreover, starting in 2024, 50% of battery components will be produced in North America. This number is expected to increase to 100% by the end of 2028. Last, the law permitted the producers of lithium to seek production tax credits equal to 10% of their operating costs.
Establishing a new lithium supply chain
While industries are encouraged by the potential momentum, the Reduction Act can be created for the US lithium production industry. The US remains far behind China and others when it comes to developing the supply chain. The system has to serve a lot to the growing market of EVs.
Simon Moores, Benchmark Mineral Intelligence Chief Executive of Lithium Market Analysis, said that establishing a steady lithium production supply chain is going to boost the level of the decade. He noted that it would be impossible for any of the US’ free trade partners to fully replace the role of China in raw material imports before 2024.