High Voltage: Japan gets in on EV tax breaks under US inflation reduction act in new battery minerals deal
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Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, manganese, magnesium, and vanadium.
A trade deal has been struck between the United States and Japan on electric vehicle battery minerals, paving the way for Japanese automakers to get in on the US$7,500 EV tax credit.
Under the IRA rules, electric vehicles can qualify for subsidies only if at least 40% of the critical minerals within come from the US or a country it has a free trade agreement with.
Materials such as lithium, nickel, cobalt, graphite, and manganese would fall under the pact and qualify for subsidies under the Inflation Reduction Act (IRA) if collected or processed in Japan.
According to reports, Japan was working with the United States to sign the agreement in Washington on Tuesday.
“As the demand for electric vehicle batteries is expected to grow significantly, securing important minerals essential for their production is an urgent issue,” Japanese trade minister Yasutoshi Nishimura told reporters.
The US Treasury is poised to outline sourcing requirements for the EV tax subsidies by the end of the week, delivering much awaited guidance to the auto, battery, and clean energy sectors.
News comes hot on the heels of an agreement between the US and European Commission, allowing European carmakers to get access to the US market, and thus to US tax breaks.
Meanwhile, over in the US, automakers are making a concerted effort to secure their own supply chains and reduce China’s stranglehold on the market.
China produces three-quarters of all lithium-ion batteries and is home to 70% of production capacity for cathodes and 85% for anodes (both are key components of batteries).
Ford CEO Jim Farley told Yahoo the challenge is going to be to onshore all of that capability in the US.
“It will be a huge job, just like it has been for semiconductors,” he said.
“Batteries are the constraint here,” @Ford CEO @jimfarley98 says on ramping up EV production. “Both lithium and nickel are really the key constraining commodities. We normally get those from all over the world. … We want to localise that in North America.” pic.twitter.com/90uPr8DVtE
— Yahoo Finance (@YahooFinance) March 24, 2023
“Batteries are the constraint with both nickel and lithium being the top two key constraining commodities.
“We normally get those materials from all over the world from South America to Africa to Indonesia and Southeast Asia but we want to localise that here in North America – not just the mining but the processing of the materials,” he explained.
“We build about 5 million vehicles at Ford, but we are going to build an extra 2 million with our EV business – that’s why we call ‘Model e’ a start-up because we are going to grow the company’s revenue by about 30 or 40 per cent.
“This is a growth business… by the end of this year we will secure all the raw materials to make 2 million batteries by 2026 that we are going to need to go into our vehicles.
“We are in good shape because we’ve been working on this for a couple of years now.”
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, magnesium, manganese, and vanadium is performing>>>
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Liontown is the biggest mover this week following its rejection of a $5.2 billion takeover offer from one of the world’s largest lithium producers, Albermarle.
It was the third time in five months Albermarle had made an offer for the Kathleen Valley mine developer with previous non-binding indicative proposals including $2.35 per share and $2.20 per share.
This time it valued LTR at $2.50 a share, more than it has ever been worth, however LTR’s board of directors determined it substantially undervalued the company and was not in the best interest of shareholders.