US Senator Might Sue Treasury Department Over EV Battery Sourcing Regulations

Government / 12 Comments

Senator Joe Manchin: "I'm willing to stop it all."

West Virginia Democrat Senator Joe Manchin made it clear to Automotive News that he's prepared to sue the US Treasury Department over upcoming new battery production sourcing rules that are a part of the Inflation Reduction Act (IRA).

These rules are expected to be revealed shortly after they were delayed in late December. Manchin's concern is how the Treasury could define the battery manufacturing process. More specifically, he wants to ensure EV battery production will be in the US, not China. It's no coincidence that he happens to be the Senate Energy Committee Chairman.

"What I'm most concerned about is how they classify the processing with manufacturing," he said. "Manufacturing is meant to bring manufacturing back to the United States. It's not basically allowing everyone to put all the parts and build everything you can for that battery somewhere else and then send it here for assembly."

This is not the first time Manchin has taken a hard stance against battery sourcing requirements.

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In January, Manchin wanted to close a loophole in the IRA by requiring a certain amount of battery materials to be sourced from North America, not China. He also wants this amount to be increased by the end of 2023.

"I think they're going to try to screw me on this," Manchin added. "I'm willing to go to court. I'm willing to stop it all." This is not something automakers want to see happen, especially those whose plug-in electric vehicles are not built in the US, such as the Hyundai Ioniq 5.

The guidance is expected to state that 40% of an EV battery's main elements must be extracted or processed in either the US or a country that has a free trade agreement with the US. Materials that have been recycled in North America will also qualify. By 2027, that figure will increase to 80%. Battery components, meanwhile, must have a 50% North American production figure and, come 2029, 100%.

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That still might not be good enough for Manchin, hence his lawsuit threat.

"I'm fine with the processing in those areas. I'm just not fine with you all completing the project, and all we're going to end up is assembling here," he reiterated. "That is not the bill. That's not how we wrote it, and it's not how it should be implemented," said Manchin.

The upcoming battery sourcing guidance is a big deal for anyone considering buying a plug-in vehicle because it will determine which makes and models will be eligible for the full $7,500 tax credit. The feds modified the IRA's classification rules early last month to make more EVs eligible for the credit.

Automakers, including GM, Ford, and Hyundai, have already announced new battery production plants in the US, but they're not expected to come online for a few years. These larger carmakers are still at a significant advantage over their smaller rivals, such as Lucid and Rivian, which purchase batteries from suppliers in Japan and South Korea, respectively.

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