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 the qualification of the EV tax credit. The new guidance focuses squarely on EV batteries in order to qualify for the full $7,500 EV tax credit. This has been a much-awaited development in the EV industry, including EV manufacturer Fisker. The updated guidelines will assist Fisker in planning its supply chain and production going forward.
Manufacturers still need to perform the final assembly of EVs in North America. However, the new guidelines have added “and/or” requirements for sourcing critical minerals and battery components. EVs 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 is eligible for a $3,750 credit.
Critical minerals must be either extracted or processed in the United States. Alternatively, they can be sourced 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% annually 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 EVs
The new rules will apply to EVs placed in service on or after April 18th, 2023. They will be subject to the critical mineral and battery component requirements outlined in the guidelines. A list of eligible EVs that meet the new guidelines will be available when the rules go into effect. At this time, we shouldn’t expect the Fisker Ocean to appear on the list. However, Fisker customers with a written binding contract from August 2022 should speak to their Tax Professional about IRS guidance on new EVs purchased in 2022 or before.
Fisker’s Next Steps
Currently, Fisker is manufacturing the Ocean electric SUV in Graz, Austria with Magna Steyr. Although, Fisker has expressed its consideration of 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 regarding the sourcing of critical minerals and battery component for the Fisker PEAR. However, Fisker does have a partnership for the Fisker Ocean with CATL, the world’s largest EV battery manufacturer. The updated guidelines from the US Treasury Department should prompt Fisker to release details regarding its North American supply chain, manufacturing, and assembly plans.
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