How the Inflation Reduction Act Will Impact Electric Vehicle Industry
Manufacturers should accelerate plans to localize production of key materials for PEV batteries, re-evaluate the PEV product and feature mix, and consider faster adoption of alternative battery chemistries
In early August, the United States Senate passed the Inflation Reduction Act (IRA) of 2022, which has fundamentally changed the federal program incentivizing consumers to purchase plug-in electric vehicles (PEVs). A new report from Guidehouse Insights looks at the new program and how it will likely impact the PEV market over the next decade.
The original PEV credit program, which was established as part of the American Clean Energy and Security Act of 2009 to jump-start adoption of PEVs, included a sales cap of 200,000 PEVs per manufacturer before the incentives phased out. According to a new report from Guidehouse Insights, the combination of significant sales increases of PEVs in 2021 and 2022, regulatory pressure, and the critical mineral requirements of the IRA have lead automakers and suppliers to accelerate plans to localize production of both PEVs and battery components.
“Under the IRA, the sales cap has been eliminated and two clean vehicle credits established, each up to $3,750—one for meeting the content threshold for critical minerals and the other for North American production of battery components,” says Sam Abuelsamid, principal analyst with Guidehouse Insights. “The revised scheme is targeted at mid-income and lower-income buyers for both new and used PEVs and incentivizes production of PEVs and batteries in North America.”
Guidehouse Insights recommends that manufacturers accelerate plans to localize production of key materials for PEV batteries, re-evaluate the PEV product and feature mix to make more vehicles available within the cost caps, and consider faster adoption of alternative battery chemistries such as lithium iron phosphate or lithium sulfur, which can leverage domestic raw materials.
The report, How the Inflation Reduction Act Will Impact the Electric Vehicle Industry, analyzes the requirements and incentives laid out in the IRA; analyzes the impact on the US PEV market; specifies who benefits among manufacturers and consumers; and gives recommendations for automakers and suppliers. An executive summary of the report is available for free download on the Guidehouse Insights website.
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*The information contained in this press release concerning the report, How the Inflation Reduction Act Will Impact the Electric Vehicle Industry, summary and reflects the current expectations of Guidehouse Insights based on market data and trend analysis. Market predictions and expectations are inherently uncertain and actual results may differ materially from those contained in this press release or the report. Please refer to the full report for a complete understanding of the assumptions underlying the report’s conclusions and the methodologies used to create the report. Neither Guidehouse Insights nor Guidehouse undertakes any obligation to update any of the information contained in this press release or the report.