The U.S. Treasury Department and the IRS released proposed guidance on the new clean vehicle provisions of the Inflation Reduction Act that will lower costs for consumers, build an industrial base and spur manufacturing in the U.S., and strengthen supply chains, according to the Treasury's news release.

Since the Inflation Reduction Act was enacted, at least $45 billion in private-sector investment has been announced across the U.S. clean vehicle and battery supply chain.

“The Inflation Reduction Act is a once-in-a-generation piece of legislation that is lowering costs for American consumers, building a strong U.S. industrial base, and bolstering supply chains,” said Janet L. Yellen, secretary of the Treasury. “Treasury is taking an important step that will help consumers save up to $7,500 on a new clean vehicle and hundreds of dollars per year on gas while creating American manufacturing jobs and strengthening our energy and national security.”   

The Notice of Proposed Rulemaking (NPRM) provides clarity and certainty to manufacturers on the Inflation Reduction Act requirements that vehicles eligible for the clean vehicle credit undergo final assembly in North America and do not exceed an MSRP of $80,000 for a van, pickup truck, or sport utility vehicle, or $55,000 for any other vehicle.

The NPRM also explains how manufacturers may satisfy the critical mineral and battery component requirements under the Inflation Reduction Act.

To be eligible for a $7,500 credit, clean vehicles must meet sourcing requirements for both the critical minerals and battery components contained in the vehicle. Vehicles that meet one of the two requirements are eligible for a $3,750 credit.

To meet the critical mineral requirement and be eligible for a $3,750 credit, the applicable percentage of the value of the critical minerals contained in the battery must be extracted or processed in the U.S. or a country with which the U.S. has a free trade agreement, or be recycled in North America.

To meet the battery component requirement and be eligible for a $3,750 credit, the applicable percentage of the value of the battery components must be manufactured or assembled in North America.

Beginning in 2025, an eligible clean vehicle may not contain any critical minerals that were extracted, processed, or recycled by a foreign entity of concern. The NPRM states that Treasury and IRS will issue subsequent guidance on this provision.

The NPRM is filed for public inspection and will be published in the Federal Register on April 17, 2023. Vehicles placed in service on or after April 18, 2023, will be subject to the critical mineral and battery component requirements laid out in the rule.