US House passes bill targeting China that would limit EV tax credits

A group of automakers says the bill makes fewer vehicles eligible for the tax credits.

The United States House of Representatives has narrowly voted to approve legislation to tighten rules limiting Chinese content in vehicles qualifying for US electric vehicle (EV) tax credits.

The House voted on Thursday 217 to 192 to approve the bill, which has not been taken up by the US Senate, to tighten the definition of Chinese components that make vehicles ineligible for US EV tax credits.

The Alliance for Automotive Innovation (AAI), which represents General Motors, Toyota Motor Corporation, Volkswagen, Hyundai and other car companies, said the bill would result in fewer vehicles qualifying and would mean aggressive rules on vehicle emissions and EV targets would need to be rolled back.

AAI’s CEO John Bozzella said that those standards were based in part on the availability of EV tax credits and that if the incentives are eliminated “the automotive industrial base faces a serious economic and national security risk from China, the US becomes less competitive, and the rug is pulled out from consumers”.

The bill, sponsored by Representative Carol Miller, a Republican from West Virginia, would tighten the definition of a so-called “Foreign Entity of Concern” that applies to China and other countries. She said it would “ensure that Chinese companies can no longer benefit from electric vehicles tax credits meant for US manufacturers”.

The rules required under an August 2022 law are designed to wean the US electric vehicle battery supply chain away from China.

The US Treasury and Chinese Embassy in Washington did not immediately comment.

Currently, 22 of the 113 EV or plug-in hybrid models for sale in the US are eligible for the EV tax credit – and just 13 get the full $7,500 credit, Bozzella said.

In May, the US Treasury gave automakers additional flexibility on battery mineral requirements for electric vehicle tax credits on some crucial trace minerals from China, such as graphite.

The department said it would give automakers until 2027 to remove some hard-to-trace minerals like graphite contained in anode materials and critical minerals contained in electrolyte salts, binders, and additives.