Inflation Reduction Act: Where could automakers shift their supply chains? Report

Insight 31 May 2023

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Report summary

The US Treasury on March 31 released new guidance on the Inflation Reduction Act’s revamped US$7,500 EV tax credit. It provided new information around its interpretation of the mining and refining stages for the “50% of value added” test, its intention to adapt the conditions of the test through 2030 and its plan to cover countries the US doesn’t have a free trade agreement with as eligible ally-shored partners. In this article, we discuss: • Which upstream supply stages are likely to be ally-shored and/or moved out of China by US automakers and by when • Which countries, assets and companies are expected to be targeted for sourcing by US OEMs, categorised by mineral, chemical, material, and component • How upcoming rules around the Treasury’s interpretation of ‘foreign entities of concern’ will impact major upstream players with direct and indirect Chinese interests

An easing of strict terms and conditions
WoodMac’s take
- Critical Minerals
- Battery Components
What still needs clarification
The impact of the 50%+ value-added condition for critical minerals
- Lithium
- Nickel
- Graphite
What battery components should automakers target?
How many EVs will be eligible for the US$7,500 credit?
- Lithium
- Nickel
- Graphite
- Other metals ex-China
- Do cathode and precursors matter?