Senator Manchin Challenges EV Tax Credit Battery Rules, Asserting China’s Market Grip

West Virginia's Senator Manchin challenges the Biden administration's rules on EV tax credit for batteries, according to Reuters.

Senator Manchin, recognized for his frequent stance against policies from President Biden's team and recently changed his party affiliation to independent, expressed to Secretary of the Treasury Janet Yellen at a Senate Appropriations Committee session that the stipulations for electric vehicle tax credits, which mandate the use of domestic materials for batteries, have been diluted.

Factory for producing Mercedes-Benz batteries.

The regulations on battery materials, which are part of the Inflation Reduction Act, are designed to reduce China's involvement in the American electric vehicle supply chain. Last month, the Biden administration relaxed these regulations for a time span of two years, yet maintained certain limitations on materials from China. This seems to be the point of contention for Manchin.

During the session, the Senator expressed that the Treasury Department's reading of the regulations concerning battery materials would not bolster American battery supplies, but instead, maintain China's complete market presence throughout the duration of the IRA. He argued that relaxing the regulations to permit car manufacturers to utilize battery components like graphite from China for an extended period is a violation of the law.

The Battery Evaluation and Testing Facility at Ford, located in Allen Park, Michigan.

Manchin has previously expressed opposition to elements of the Inflation Reduction Act (IRA) connected to electric vehicles. As a member of the Democratic party, he once posed a risk to the IRA's progress by objecting to its early emphasis on vehicles produced by union labor. His resistance led to the removal of a suggested additional incentive for the EV tax credit, which would have been applicable to a limited range of vehicle models at the start.

Manchin has raised objections regarding the "leasing loophole" which is a byproduct of the Inflation Reduction Act (IRA). The Biden administration's interpretation has deviated from the initial purpose, resulting in government subsidies for electric vehicles (EVs) that should not be eligible for the tax incentive, particularly high-end EVs that surpass the price limitations established by the IRA. This has led to an increase in the leasing of EVs, which in turn encourages car manufacturers to produce more of these premium electric vehicles.

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