The updated guidelines for the EV tax credit, with a focus on EV batteries, will help Fisker in its supply chain and production planning.
Today, the IRS released updated guidelines on qualifying for the EV tax credit. He new guidance focuses squarely on EV batteries to qualify for the full $7,500 EV tax credit. This has been a highly anticipated development in the electric vehicle industry, including electric vehicle manufacturer Fisker. The updated guidelines will help Fisker to plan its supply chain and production in the future.
Manufacturers have yet to do final assembly of electric vehicles in North America. However, the new guidelines have added “and/or” requirements to obtain critical minerals and battery components. Electric vehicles must meet sourcing requirements for critical minerals and battery components to qualify for the full $7,500 credit. If an EV meets only one requirement, it’s eligible for a $3,750 credit.
Critical minerals must be mined or processed in the United States. Alternatively, they can be obtained from any country with which the United States has a free trade agreement. Another option is for the minerals to be recycled in North America. The percentage of critical materials starts at 40% in 2023 and increases by 10% per year until it reaches 80% in 2027. The battery components portion requires 50% of the parts to be manufactured or assembled in North America in 2023. This percentage increases by 10% each year and reaches 100% by 2029.
Effective Date and Eligible Electric Vehicles
The new rules will apply to electric vehicles placed in service on or after April 18, 2023. They will be subject to the critical mineral and battery component requirements outlined in the guidelines. A list of eligible electric vehicles that meet the new guidelines will be available when the rules go into effect. At this time, we should not expect Fisker Ocean to appear on the list. However, Fisker clients with a binding written contract as of August 2022 should speak with their tax professional about IRS guidance on new electric vehicles purchased in 2022 or earlier.
Fisker’s next steps
Fisker currently builds the Ocean electric SUV in Graz, Austria with Magna Steyr. Although, Fisker has expressed consideration of the US production of the Fisker Ocean. This was due to strong demand and changes to the EV tax credit. On the other hand, Foxconn will produce Fisker’s PEAR in Lordstown, Ohio. Fisker has yet to share details about sourcing critical minerals and battery components for Fisker PEAR. However, Fisker has a partnership for Fisker Ocean with CATL, the world’s largest manufacturer of electric vehicle batteries. Updated guidance from the US Treasury Department should prompt Fisker to release details about its supply chain, manufacturing, and assembly plans in North America.
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