The Inflation Reduction Act (IRA), signed into law by President Joe Biden on August 15, contains more than $369 billion in provisions aimed at combating climate change over the next decade. The bulk of the climate package is a federal tax rebate of up to $7,500 on the purchase of a variety of electric vehicles, including used ones made in North America.
The key difference from previous EV incentives is that in order to qualify for the tax credit, future EVs will not only have to be assembled in North America, but also be made from batteries produced domestically or in free trade countries. agreements with the US such as Canada and Mexico. The new rule is intended to encourage electric vehicle makers to shift their supply chains from developing countries to the US, but industry insiders are wondering if the shift will happen in the next few years, as the administration hopes, or not at all.
The IRA places restrictions on two aspects of electric vehicle batteries: their components, such as battery and electrode active materials, and the minerals used to manufacture those components.
Starting next year, eligible EVs will require at least half of their battery components to be made in North America, with 40% of battery raw materials coming from the US or its trading partners. By 2028, the required minimum percentage will increase year on year to 80% for battery raw materials and 100% for components.
Some automakers, including Tesla and General Motors, have begun developing their own batteries at factories in the US and Canada. Tesla, for example, is making a new type of battery at its Nevada plant that is supposed to have a longer range than those currently imported from Japan. This vertical integration could help electric vehicle manufacturers pass IRA battery testing. But the real problem is where the company gets the raw materials for the batteries.
Electric vehicle batteries are typically made from nickel, cobalt and manganese (the three main elements of the cathode), graphite (anode), lithium and copper. Known as the “big six” of the battery industry, mining and processing of these minerals is largely controlled by China, which the Biden administration has described as a “foreign entity of concern.” Any electric vehicle manufactured after 2025 that contains materials from China will be excluded from the federal tax credit, according to the IRA. The law lists over 30 battery minerals that meet production percentage requirements.
Chinese state-owned companies own about 80 percent of the world’s cobalt processing operations and more than 90 percent of the nickel, manganese and graphite refineries. “If you buy batteries from companies in Japan and South Korea, as many automakers do, there’s a good chance your batteries contain materials recycled in China,” said Trent Mell, chief executive of Electra Battery Materials, a Canadian company that sells global supplies of processed cobalt. Electric vehicle manufacturer.
“Automakers may want to make more electric vehicles eligible for the tax credit. But where are they going to find qualified battery suppliers? Right now, automakers have no choice,” said Lewis Black, CEO of Almonty Industries. The company is one of several suppliers outside of China of tungsten, another mineral used in the anodes and cathodes of some electric vehicle batteries outside of China, the company said. (China controls over 80% of the world’s tungsten supply). Almonty mines and processes in Spain, Portugal and South Korea.
China’s dominance in battery raw materials is the result of decades of aggressive government policy and investment – Black’s skepticism can easily be replicated in Western countries.
“Over the past 30 years, China has developed a very efficient battery raw material supply chain,” Black said. “In Western economies, opening a new mining or oil refinery can take eight years or more.”
Mell of Electra Battery Materials said his company, formerly known as Cobalt First, is North America’s only producer of cobalt for electric vehicle batteries. The company receives crude cobalt from an Idaho mine and is building a refinery in Ontario, Canada, which is expected to start operations in early 2023. Electra is building a second nickel refinery in the Canadian province of Quebec.
“North America lacks the capacity to recycle battery materials. But I believe this bill will spur a new round of investment in the battery supply chain,” Meyer said.
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Post time: Aug-31-2022
