CEO Column

Jennifer Safavian | International Trade Collaboration Will Boost Clean Vehicle Production in the U.S.

Jennifer Safavian
April 28, 2023

It’s clear that the transition to clean transportation is well underway. The growth over the past decade has been exponential: In 2012, there were only 50,500 clean vehicles sold in the U.S. Just ten years later, that number jumped to 940,000 clean vehicles sold. International automakers accounted for nearly 30% of all new clean vehicle sales in the U.S. last year, and Autos Drive America members currently offer more than 50 clean models for consumers.

Manufacturing clean vehicles is not only in line with consumer demand—it’s also an environmental imperative. International automakers are committed to the transition to carbon-neutral and clean transportation, having pledged more than $25 billion in investments toward the manufacture and production of clean vehicles and EV batteries in the U.S. since 2020. Autos Drive America has long said that it will take time and collaboration with our global partners for automakers and suppliers to develop the supply chains and production facilities necessary to produce cleaner vehicles both in the U.S. and around the world.

Last month, the U.S. Department of the Treasury released its guidance on the Inflation Reduction Act (IRA)’s sourcing requirements for critical minerals and battery components under the law’s Clean Vehicle Credit. This guidance provided clarity for automakers navigating the tax credit and highlighted the challenges ahead for automakers’ electrification efforts and consumers’ adoption of clean vehicles. As international automakers continue to diversify supply chains to comply with the guidance, additional vehicles will qualify for partial or full credit in the coming months.

The reality is that manufacturing in the U.S. is reliant on imports for the majority of critical minerals inputs used to produce clean energy technologies, leaving automakers heavily reliant on international supply chains and working with other nations. While the U.S. is making progress to increase mining and refining of critical minerals such as cobalt, lithium, and nickel, it’s imperative that the U.S. creates strong partnerships with our trade allies to open access to other necessary critical minerals.

To help navigate the transition to clean vehicles, the Biden administration recently reached an agreement with Japan—one of our closest allies and trading partners—that enables automakers to use critical minerals processed in Japan to meet the sourcing requirements for the tax credit as laid out in the IRA. Japan has a well-developed and large mineral processing industry and is rapidly expanding its critical minerals mining and refining efforts. The country’s first lithium hydroxide refining plant is beginning operations, and Japanese mining company Sumitomo Metal is planning to double battery mineral production by 2028. This new trade agreement is a positive step that will help diversify and strengthen supply chains for automakers.

We are optimistic that a similar deal will soon be reached with the European Union (EU), the second largest global processor and refiner of cobalt. In March, the European Commission proposed a plan to dramatically increase the mining and processing of critical minerals within Europe. A critical minerals agreement between the EU and the U.S. would allow automakers to utilize European critical minerals while producing vehicles right here in the U.S.

Now that Treasury has issued their guidance and automakers have a better understanding of which models are eligible for the tax credit, the focus must turn to helping consumers navigate the complexities of the Clean Vehicle Credit. The rationale for this emphasis is simple: Consumers who are unaware of the credit or confused by its provisions are unlikely to take advantage of it, taking away the tax incentive of buying an EV in the first place. Consumer adoption of clean vehicles will drive the next generation of clean transportation around the world. For the U.S., our allies, and manufacturers to reach our shared climate goals, policymakers and automakers alike must work together to make purchasing clean vehicles accessible and affordable for American consumers.