It's rare to see an industry react so quickly and demonstrably to a piece of legislation as automakers and suppliers seem to have with the passage of the Inflation Reduction Act.
President Joe Biden signed it into law Aug. 16, but it wasn't really his plan: The dramatic reshaping of federal support for electric vehicles was crafted by Joe Manchin, the Senate Democrat from the mining state of West Virginia. Now, only EVs assembled in North America qualify for credits, and starting next year, key minerals and battery components must be sourced domestically or from free-trade partners.
Automakers and suppliers have already announced nearly $15 billion in EV battery investments or assembly plant retrofits to transition to battery-electric vehicle production, including Honda's $3.5 billion joint venture battery plant in Ohio with LG Energy Solution. Other automakers may quickly follow: Audi executives say the legislation has them thinking about building the automaker's first U.S. plant.
The motivation, according to Mujeeb Ijaz, CEO of battery supplier Our Next Energy, is the clarity the law brought to the decision-making process. Our Next Energy this month announced its intention to build a $1.6 billion battery plant in Michigan.
The law creates a credit for battery cells equivalent to $35 per kilowatt-hour of capacity, with battery packs eligible for a credit of up to $10 per kilowatt-hour of capacity, according to the Congressional Research Service. It also provides a 10 percent credit for critical minerals production. For executives trying to make BEV production make economic sense, the subsidies in the law seem to have decisively tipped the scales.
