– The US and EU are at odds over eligibility of European-manufactured EVs for US tax credits and rebates.
– Negotiations between the US and EU on a raw materials partnership for EV batteries have hit roadblocks over labor standards.
– A potential agreement on critical minerals could make European EVs eligible for half of the US EV rebate under the Inflation Reduction Act.
The US and the EU have been in negotiations regarding the eligibility of European-manufactured cars for US EV tax credits and rebates. The Inflation Reduction Act, signed into law in 2022, contains protectionist rules that impact EVs imported from the EU. For electric cars to be eligible, a certain percentage of critical minerals used in the batteries must come from the US or a country with a free trade agreement with the US. Negotiations have yet to yield a breakthrough, with disagreements over the formal structure of the agreement.
New EU rules that ban products made using forced labor have raised the prospect of concluding a deal on critical minerals with the US. Progress has been made in negotiations, and if an agreement is reached, European electric vehicles may be eligible for half of the EV rebate provided by the IRA. The leasing loophole created by the Biden administration allows European car manufacturers to qualify for benefits under the IRA, but if they want to fully exploit the provisions, they must assemble vehicles in the US.
A new working group called the “Minerals Security Partnership Forum” was established in the absence of a raw materials partnership. This forum aims to cover critical materials essential for green technologies and digital economies. The EV revolution is reshaping the auto industry globally, with nations and manufacturers positioning themselves for mass adoption of electric vehicles. The eventual agreement between the US and EU is crucial due to the potential impact on the industry and trade relations.