The U.S. Department of Energy (DOE) is putting the brakes on foreign influences in America's burgeoning electric vehicle (EV) battery supply chain. According to a May 3rd report from the DOE, they have now finalized what defines a "foreign entity of concern" (FEOC) crucial to limiting the participation of overseas powers, specifically from nations the U.S. regards with caution like China, Russia, Iran, and North Korea, in domestic battery production lines.
The guidance, originally proposed last December, aims to carefully better guide automakers and stakeholders in sniffing out FEOCs in their supply chains. It pairs up with a fresh final rule from the Department of the Treasury and the Internal Revenue Service (IRS) that leans on this definition to implement the Clean Vehicle Tax Credit under the Inflation Reduction Act. Together, this one-two punch of regulatory measures is set to accelerate America's shift to a cleaner, more independent automotive future.
Electric dreams are turning into reality with plug-in EV sales, according to Bloomberg New Energy Finance (BNEF), quadrupling since President Biden took office and expected to zoom to 1.9 million in U.S. sales by the end of 2024. The DOE's Battery Materials Processing and Manufacturing grant program will now give preference to applications that promise not to use materials supplied by an FEOC, encouraging homegrown innovation and production.
Getting to grips with the fine print, a FEOC is identified based on where it's headquartered, its percentage of foreign government-held voting rights, and categorically out of bounds if it exhibits clear ties; like being effectively controlled through licenses or contracts, with an entity from a nation the U.S. is wary of. From 2024 forward, this means an EV sporting battery components made or assembled by a FEOC won't be able to roll down the road with the Clean Vehicle Tax Credit in the trunk, and from 2025, the same goes for an EV powered by a battery laden with critical minerals having passed through the hands of a FEOC.
The DOE interprets these policies as integral to President Biden's "Investing in America" agenda, designed to wrench America's automotive supply chain from the grasp of potentially adversarial nations and to cement a more sustainable, domestically-reliant industry. With these latest rules set in the regulatory stone, the road ahead for American EV production is charted to be less bumpy — provided that the trail is blazed with materials mined from friendlier soils.
