GM lost tax credits on 20,000 EVs due to battery sourcing requirements

General Motors said the Detroit automaker built about 20,000 electric vehicles (EVs) so far this year that didn't qualify for EV tax credits because of battery sourcing requirements.

GM lost access to federal tax credits for nearly all of its electric vehicle models on Jan. 1 when new requirements from the U.S. Treasury Department took effect and made many EVs ineligible for tax credits. GM Chief Financial Officer Paul Jacobson said GM built about 20,000 vehicles over a 60-day period this year that didn't qualify for the credit.

Despite GM's EVs losing eligibility for the tax credits for the first part of this year, GM said that it has since regained eligibility for many of its EVs, including the Chevrolet Blazer EV and the Cadillac Lyriq, after it made changes to its sourcing policies to comply with the regulation.

The sourcing requirements were included as part of the Inflation Reduction Act and require that automakers can't source any battery components from foreign entities of concern while maintaining eligibility for the EV tax credit.

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It also set a requirement for the percentage of applicable EV battery components that must be manufactured or assembled in North America.

For 2023, the applicable percentage was 50%, and it rises to 60% for 2024 and 2025. From there, it rises by 10 percentage points annually until it reaches 100% beginning in 2029.

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The EV tax credit rules also include a requirement that critical minerals contained in the battery be extracted or processed either in the U.S. or in a country with which the U.S. has a free trade agreement or be recycled in North America.

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The battery sourcing threshold started at 40% in 2023, rose to 50% this year and will rise by 10 percentage points each year until it reaches 80% in 2027.

It also prohibits EV tax credits for any vehicle that includes battery components containing critical minerals that were extracted, processed or recycled by a foreign entity of concern.

GM did not