The US government has introduced new regulations that aim to prevent Chinese batteries from being used in cars sold in the United States. These rules could increase the price of electric vehicles for American drivers. The Biden administration proposed regulations that would reduce subsidies for vehicles containing Chinese-made battery components or produced by companies with strong ties to the Chinese government. China is the leading producer of EV batteries globally. The new regulations would disqualify vehicles with these components from receiving the full $7,500 US tax credit. The US Treasury, Internal Revenue Service, and Department of Energy have issued guidelines that prohibit the use of parts made or assembled by foreign entities of concern (FEOC), which include companies based in China, Russia, North Korea, or Iran. The regulations could have a significant impact on automakers' supply chains, as China dominates battery cell production and mineral processing for EV batteries. Tesla, for example, has warned that its vehicles may become more expensive as a result of these regulations. The US government's efforts to redirect auto manufacturing to the United States also include mandating that vehicles eligible for the $7,500 credit must be assembled in North America and require a certain percentage of battery components and minerals to be produced in the United States or a country with a US free trade deal.
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