Inflation Reduction Act: Benefits of U.S. manufactured material
The Inflation Reduction Act (IRA) of 2022 is landmark U.S. legislation that, among other things, was developed to bolster clean energy production and domestic battery supply chains to enable the mass adoption of electric vehicles. The IRA offers a series of tax credits for battery material producers, cell makers, and EV purchasers.
IRA tax advantages across the EV supply chain.
The sections of the IRA that impact the domestic EV market for new cars are 45X and 30D. Explore how they work.
45X Advanced Manufacturing Credits
Tax credits on the materials for and assembly of electric vehicle batteries – at least one production step must occur in the U.S.
Critical Mineral Production
10% credit on costs incurred to produce minerals.
Electrode Active Material Production
10% credit on costs incurred from the production of materials.
$35/kWh credit for U.S-based battery cell production and assembly.
$10/kWh credit for U.S-based battery module production and assembly.
30D Clean Vehicle Credit
Consumer tax credits up to $7,500 for new plug-in or fuel cell electric vehicles whose critical minerals and battery components come from domestic sources, subject to material, pricing, and income requirements. The revised tax credit applies to vehicles placed in service after April 17, 2023.
$3,750 credit for clean vehicles that meet the critical mineral requirements and are assembled in the U.S.
$3,750 credit for clean vehicles that meet the battery component requirements and are assembled in the U.S.
Big shifts for IRA tax credit qualification.
The IRA tax credits could deliver billions in value to cell makers and big savings for consumers. The law comes with new requirements on where companies can source and manufacture the critical minerals and battery components needed to develop EV batteries.
Critical mineral requirements
Starting in 2023, at least 40% of the value of critical minerals in a clean vehicle’s battery must be extracted or processed in the United States, or in any country with which the U.S. has a free trade agreement in effect, or recycled in North America. The percentage increases by 10% every year, capping at 80% after 2026.
Battery component requirements
Starting in 2023, at least 50% of the value of battery components used for clean vehicles must be manufactured or assembled in North America. The percentage increases to 60% for 2024 and 2025, then by 10% every year after that, rising to 100% after 2028.
Critical minerals can be sourced either from the U.S. or from countries with a Free Trade Agreement with the U.S. Starting in 2024 for battery components and 2025 for critical minerals, the IRA prohibits sourcing from Foreign Entities of Concern.
Get more from IRA tax credits with Sila materials.
Increase your GWh output, earn more tax credits.
The energy density gains with Sila instantly boost the capacity of your factory by 20% with no additional capital expenditure. That means a factory with 10 GWh of installed capacity can gain 2 GWh of output, and take advantage of the additional tax credit value.
U.S. source for critical mineral replacement.
By 2025, cell makers will need to find alternative sources for critical minerals like graphite to meet the requirements of the Foreign Entities of Concern rule. Sila’s anode material not only outperforms graphite, it is also manufactured in the U.S. ensuring adherence to the rule.
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