Under the IRA Law, Manufacturers Get EV Tax Credits, Too!
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Manufacturers Get EV Tax Credits, Too

The IRA: what’s in It for manufacturers?

While most people try to figure out what EV tax credits consumers get under the new IRA law, we look at what manufacturers get!

Despite the criticisms being rightly aimed at the consumer EV tax credits and rebates in the recently passed Inflation Reduction Act of 2022, the bill has been justly praised for the steps it’s enabled towards an additional billion ton reduction in America’s annual CO2e emissions by 2030 — that’s on top of the carbon reduction goals set by previous Administrations, and those steps have wide-reaching consequences for the automotive industry as-a-whole.


Subsidies for Made in the USA Batteries

Toyota bZ4X BEV launched with $42,000 price tag
Toyota is set to be the big winner; image courtesy Toyota.

In order for consumers to take advantage of the largest tax credits and rebates offered under the IRA, the vehicle and its batteries have to meet a minimum North American content rating — which is a problem, because there is virtually zero lithium and rare-earth mineral mining in US as we go to press with this. What’s more, rushing that manufacturing capacity online will add costs, while US and Canadian labor has, historically, been much more expensive than Chinese labor.

To help make up the gap, the IRA provides a $35 per kWh incentive for each American-made li-ion battery cell. With an average cost today of about $130 per kWh, that provision alone just sliced more than 25% off the cost of making a battery cell in America. (!)

The lower-cost nickel-metal hydride batteries currently being used and developed by Toyota (and which are set to be used in Toyota’s captive Subaru and Mazda brands’ hybrids and PHEVs) fare even better. At less than $80 per kWh in 2022, the $35 incentive slashes its battery production costs nearly in half. (!!)

You can get a better sense of how those costs stack up in an industry-standard li-ion battery in the handy-dandy infographic, from the Visual Capitalist, below.


EV Battery Cost | Infographic

Breaking Down the Cost of an EV Battery Cell

But wait — as they say. There’s more! There is an additional $10 credit per kWh on completed battery modules, which Bloomberg claims could reduce the cost of assembling li-ion battery packs by a third … and (you guessed it) that applies to Toyota’s lower-cost batteries, as well.


It’s My Money, I Want it Now!

Giga Texas Tesla factory; image courtesy Tesla.

Let’s say you’re more of a JG Wentworth type company, and you don’t want to wait until April 15th to get your sweet, sweet, Inflation Reduction Act money — what do you do, then?

Well, we have some good news for you, too! The legal experts at JD Supra have taken a deep dive into the IRA, and they’ve discovered that the new law, “includes almost $6 billion for competitive grants to be made by DOE on a 50/50 cost share basis for advanced industrial technology designed to accelerate greenhouse gas emissions reductions in an industrial process.”

That means that qualifying grant recipients could get up to half of their costs for new equipment or upgrades covered, and the DOE has, reportedly, been directed to use the expected greenhouse gas emissions reductions of the factory upgrades as its primary consideration.

That should help to offset some of Stellantis’ $300 million in fines related to diesel emissions cheating, right?

Finally, an additional $2 billion for competitive grants to be made by DOE on a 50/50 cost share basis for the development of electric, hybrid and hydrogen fuel cell vehicles, as well as further additions to the $62 billion that had already been allocated to the DOE for greenhouse gas reducing grants DOE under the IIJA.





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