U.S. gives 2-year grace period until IRA battery regulations take effect

Hyundai Motor's Ioniq 5 sedan [HYUNDAI MOTOR]

 

The U.S. government announced a two-year grace period before the regulations on battery materials under the Inflation Reduction Act (IRA) become enforceable, giving Korean battery makers until the end of 2026 to secure an alternative supply of key EV minerals such as graphite from non-Chinese companies.

 

The U.S. Treasury Department announced the final revised IRA guidelines on Friday.

 

Graphite is the main product in EV batteries with a supply heavily dependent on Chinese imports. Under the relaxed IRA guidelines, key materials including graphite were categorized as "impracticable-to-trace" and the U.S. government will defer implementing the rule that bans materials sourced from foreign entities of concern (FEOC) such as China, Russia, North Korea and Iran.

 

The U.S. government under the IRA provides subsidies of up to $7,500 in tax credits for EV manufacturers, providing $3,750 each for complying with regulations on EV battery components and key minerals. However, manufacturers who procure parts or key materials from FEOC are ineligible for these benefits.

 

With the law regarding components coming into effect this year, the number of EV models eligible for credit fell sharply to 19 from last year's 43.

 

New guidelines on the amount of eligible key battery minerals needed for the subsidies were also proposed. In last year's provisional guidelines, manufacturers would be considered eligible if they got more than 50 percent of their key minerals from mining or processing in the United States or its free trade agreement (FTA) partners.

 

In the revised guidelines, the 50 percent threshold scrapped and changed to only take into consideration the relative proportion of value generated from within the United States or its FTA partner countries.

 

The clause also grants EV makers a two-year grace period.

 

Ahn Duk-geun, minister of trade, industry and energy, expressed his satisfaction with the IRA revisions, including those regarding the graphite issue, citing group efforts from the related companies and governmental cooperation.

 

"We are pleased that efforts made by Korean EV makers, including through the visit to the United States last April, has bared fruit," Ahn said in a statement Saturday. "This is a result of the concerted efforts of the public and private sectors, based on the robust cooperative relationship between Korea and the United States in industry and trade."

 

The Trade Ministry will hold a joint private-public sector meeting chaired by Ahn on Wednesday to discuss industry impacts and plans for diversifying key battery materials based on the IRA revisions.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]