The United States and Japan have reached a trade deal on electric vehicle (EV) battery minerals that will enhance their battery supply chains and expand Japanese automakers’ access to a new $7,500 U.S. EV tax credit.
According to senior Biden administration officials that spoke with Reuters, the agreement forbids both nations from imposing bilateral export limitations on the minerals critical to EV batteries, including “lithium, nickel, cobalt, graphite, and manganese.”
The agreement also seeks to diminish the reliance of the United States and Japan on China for these resources by mandating cooperation to counteract “non-market policies and practices” of other nations in the industry and evaluating foreign investments in their vital mineral supply chains.
The Biden administration is using minerals-focused trade deals to enable trusted allies to access the $7,500 tax credit in the Inflation Reduction Act. Half of the credit for purchasing consumers is reserved for North American-assembled vehicles and batteries, while the other half is contingent on at least 40% of the value of critical minerals in the battery having been extracted or processed in the United States or a country with a U.S. free trade agreement or recycled in North America.
The U.S. Treasury is expected to clarify the sourcing requirements for the EV tax subsidies by the end of the week. In a note sent to employees last week Tesla says it is expecting to lose the full $7,500 tax credit on their entry-level Model 3 and the LFP battery comes from China’s CATL.
Tesla may lose $7,500 US tax credit on the entry-level Model 3: Report