Manchin seeks to reverse Treasury exemption allowing some Chinese minerals in EVs

WASHINGTON, (Reuters) – The chair of the Senate Energy and Natural Resources Committee wants Congress to vote on reversing the Treasury Department’s electric vehicle tax credit guidance, saying it will increase U.S. reliance on China.

Senator Joe Manchin, a Democrat, said the Treasury’s guidance will make it easier for Chinese companies to take advantage of the EV tax credit “while hurting American taxpayers and increasing America’s reliance on foreign nations for battery and vehicle component supply chains, including China.”

The Treasury did not immediately comment.

It is unclear if the Senate can override the Treasury guidance. Manchin on Monday asked the U.S. Government Accountability Office for a legal opinion on whether the guidance is subject to the Congressional Review Act.

Earlier this month, the Treasury issued guidance limiting Chinese content in batteries eligible for electric vehicle tax credits starting next year.

As a result, Ford (F.N) and Tesla (TSLA.O) said some EVs will not qualify for tax credits next year.

In a win for automakers, the Treasury said it would temporarily exempt some trace critical minerals from new strict rules barring materials from China and other countries deemed a Foreign Entity of Concern (FEOC).

The new rules, required under an August 2022 law, are designed to wean the U.S. electric vehicle battery chain away from China.

The FEOC rules come into effect in 2024 for completed batteries and 2025 for critical minerals used to produce them.

The Alliance for Automotive Innovation, a group representing nearly all major automakers, said the decision to exempt trace materials for two years “was significant and well-advised” and without it could have made nearly all vehicles ineligible.

The Treasury said the few materials being exempted through 2026 each account for less than 2% of the value of battery critical minerals.

Reporting by David Shepardson; Editing by Leslie Adler and Lisa Shumaker