China Slams Plan to Cut it From US EVBattery Supply Chain
China has objected to the US government's plan to limit Chinese content in batteries for electric vehicles (EVs), saying it violates global trade principles. The Biden administration aims to limit Chinese content in batteries eligible for EV tax credits starting next year. China's dominant position in the global battery supply chain has prompted concerns from the US and Europe, leading to investigations into unfair state subsidies for Chinese manufacturers. Analysts question the scale of the risk and argue that the US and EU strategies are simply about having competitive industries.
Source: Link
Frequently Asked Questions
1. Why does China dominate the electric vehicle battery supply chain?
China dominates the entire downstream EV battery supply chain because of its substantial investments and current established infrastructure for the production of materials and components used in electric vehicle batteries. As per the Global Electric Vehicle Outlook 2022, China's dominance is recognized and investments are underway to diversify the aspects of the US supply chains.
2. What is the US's response to China's dominance in the EV battery supply chain?
The US has initiated measures to reduce dependency on China for EV supply chains. For instance, the Biden administration has released rules aimed at excluding China from the U.S. electric vehicle and battery supply, specifically highlighting regulations on excluding involvement with entities that utilize forced labor or are of concern for national security.
3. What are the potential impacts of the IRA on the US battery supply chain?
The Inflation Reduction Act (IRA) offers an investment tax credit that can reach up to 30 percent, which includes labor requirements. This credit is intended to help bridge the capital expenditure gap with China, thereby supporting the development of the domestic battery supply chain and reducing reliance on China.
4. How is the EV battery supply chain relevant to the American Jobs Plan?
As part of the efforts to build resilient supply chains and revitalize American manufacturing, the American Jobs Plan is aligned with goals to enhance the EV battery supply chain, aiming to secure the supply well ahead of the market needs.
5. Are consumers prohibited from purchasing Chinese EVs under the IRA?
There is no specific prohibition in the IRA that prevents consumers from purchasing EVs made in China. The emphasis is on reducing dependency on China for the supply chain, not on the end consumer vehicle purchasing choices.
6. What is the significance of the Treasury's recent rules regarding the EV supply chain?
The U.S. Department of the Treasury has issued rules that are designed to exclude China from the U.S. EV supply chain, which are intended to address concerns about forced labor in the supply chain and to meet the American battery-sourcing requirements.
7. Can carmakers still rely on China for battery components?
Despite the US government's push to cut China out of the EV battery supply chain, many carmakers are concerned about the loss of tax incentives and the practical difficulties of shifting their supply chains in the short term. For example, Tesla still relies on China for a significant portion of its battery supply chain, with 40% of the suppliers for materials used in Tesla’s EV batteries being Chinese companies.
8. What is being done to diversify the EV battery supply chain in the US?
Efforts such as the investment tax credit in the IRA and policies set by the Biden administration aim to encourage investment and growth in the domestic EV battery production capacity. Moving forward, such strategies may lead to a more diversified and resilient supply chain.