Dec 7, 2023 · 47m · catalyst
Update: What the new Treasury rules mean for EV supply chains
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Catalyst, host Shail Khan and battery market expert Sam Jaffe analyze the U.S. Treasury's Foreign Entity of Concern guidelines and explore their far-reaching impacts on electric vehicle tax credits, upstream mineral bottlenecks, and international supply chains.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 34.9% of the talking time here. How this is scored →
Shayle as informed peer 4.5 Guest teaching 4.4 Guest disagreement 1.3 Shayle pushing back 1.4
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 14:30 Jaffe rejects premise that Ford-CATL deal is dead
Jaffe directly counters Kann's assertion that the guidance puts a nail in the coffin for Ford's CATL licensing partnership in Michigan.
Hardest push from Shayle ▶ 44:02 Kann pushes back on ambiguity around China's FEOC statusKann challenges the idea of regulatory ambiguity, asserting that the clear legislative intent was always to shut China out of US EV battery supply chains.
Biggest teaching moment ▶ 29:31 Jaffe exposes the Australian spodumene processing bottleneckJaffe educates Kann on the supply chain nuance that Australian mined lithium hard rock is refined in China, disqualifying it from FTA treatment.
Shayle holds their own ▶ 12:52 Kann cites Greenbushes mine ownership dataKann demonstrates deep domain knowledge by citing that Greenbushes, the world's largest lithium mine, is 26% owned by China's Tianqi, triggering the FEOC threshold.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Canary Media Donation Drive and Latitude Media Promotion | 0 | 0 | 0 | 0 | Introductory credits, Canary Media donation drive, Latitude Media newsletter promotion, and sponsor announcements by Stephen Lacey. | |
| Host Monologue: Framing the Evolution of EV Tax Credit Guidance | 0 | 0 | 0 | 0 | Host solo monologue introducing the episode structure, framing the evolution of IRA guidance from April to December 2023, and introducing returning guest Sam Jaffe. | |
| Defining Foreign Entities of Concern and the 25 Percent Ownership Rule | 5 | 6 | 1 | 1 | Jaffe breaks down the newly released Treasury guidance on Foreign Entities of Concern (FEOC) and the 25 percent ownership threshold, describing it as a solid steel bowl rather than a colander. | |
| Sponsor Break: Infrastructure Power Delivery and Energy Management | 7 | 6 | 3 | 2 | Kann demonstrates deep sector knowledge by citing Greenbushes lithium ownership, while Jaffe pushes back on the assumption that Ford-CATL licensing deals are dead under FEOC rules. | |
| Revisiting April 2023: IRA Implementation and Global Manufacturing Repercussions | 6 | 5 | 1 | 2 | Kann and Jaffe review the April 2023 landscape, discussing how IRA subsidies redirected European gigafactories to North America and prompted executive orders for Japanese critical minerals. | |
| Evaluating the Dual EV Tax Credit Thresholds and Mass Market Viability | 6 | 6 | 2 | 2 | Jaffe explains why Australian spodumene refined in China fails mineral thresholds and details why upcoming mass-market $35k EVs make the $7,500 credit vital. | |
| The Constituent Materials Compromise and Free Trade Precursors | 7 | 7 | 2 | 2 | Kann quotes Joe Manchin directly on constituent materials, and Jaffe walks through the multi-stage 50 percent value-add test and the Japanese trade agreement carve-out for Tesla cathode suppliers. | |
| Unresolved Concerns in Early Guidance and the Regulatory Balancing Act | 5 | 5 | 1 | 2 | Kann presses on whether China could avoid FEOC designation, while Jaffe summarizes the regulatory balancing act between domestic supply stringency and automaker compliance feasibility. |
Statements from this episode (13)
Treasury rules classify 25% Chinese-owned entities as FEOCs, barring tax credits
“And that, that number is now 25%, so it can't be a Chinese ownership having, Chinese company having an ownership of 25% or more, or else it becomes a foreign entity of concern, and therefore disqualifies you for the tax credit.”
Treasury's FEOC guidance forms a strict barrier against Chinese battery materials
“Based on my expectations, this is, it's significantly restrictive. My expectations was there were going to be a lot of loopholes and a lot of ways for this to snake around the FEOC label. But it's a pretty, it is a pretty solid bulletproof way of keeping the C…”
A de minimis loophole allows low-value Chinese battery materials until 2026
“There is a significant loophole, which is a de minimis ruling, which essentially says if there's a small amount of material come, that, that does get its way into, from China then that will, and specifically of materials that don't have high value, and that's …”
Essentially all EV battery graphite currently originates from China
“And graphite is of course going to be one of the most severely challenged areas of battery materials, because today all graphite essentially is coming from China.”
New non-Chinese graphite facilities could produce significant volume by 2026
“I mean, there are graphite facilities being built today that should happen very relatively quickly and have a chance to be producing significant amounts of graphite in twenty-twenty-six.”
US battery plants must verify equipment control software is not Chinese-made
“So, so my company, Adionics, is building a factory in the U.S., and we need to use, we need to purchase Japanese and Korean equipment, but interestingly, there's specific language in here about control software that, for that equipment that the control softwar…”
Freyr, Northvolt, and Volkswagen redirected European battery plant developments to the US
“We've actually seen a shift, in some cases, a shift of battery plants that were planned for Europe where they said, we're gonna stop developing this and instead turn to building a plant in the U.S., Fryer did that, Northvolt did that, and a couple others, and …”
Australia, South Korea, and Chile are the biggest international IRA beneficiaries
“I think that the biggest winners, though, of the other countries that are involved, Australia and Korea and Chile are the, are by far the biggest winners. They all have free trade agreements with the U.S. And are going to come out looking very good from this.”
Nickel represents the largest mineral value share in most EV batteries
“For most of these electric vehicle batteries of all of the minerals is going to be nickel. And then lithium and cobalt probably fall in second, but the single biggest number to shoot for is the nickel itself, and that's a problem because most nickel is coming …”
US domestic battery manufacturing will reach 200 GWh by 2025
“And at that point, we're going to have the LG GM Ultium joint venture making over a hundred gigawatt hours of batteries throughout this country. LG Stellantis will be making 35 gigawatt hours. Stellantis Samsung STI will be making another 30. And then Ford wil…”
Treasury classifies battery constituent precursor materials under strategic minerals rules
“What essentially what the guidance said was constituent materials, which is going to be any of these precursor steps up to the battery component itself, essentially falls under strategic minerals. As in the strategic minerals qualification. Now they added this…”
The US-Japan critical minerals agreement was tailored to preserve Tesla's tax credits
“Essentially, my conspiracy theory, Is that essentially this was a bone that was thrown to Tesla. Because Tesla makes its battery cells in North America with Panasonic. It makes some of its materials in North America. The electrolyte is made here, the separator…”
Lithium processed in China qualifies for EV tax credits pending FEOC enforcement
“If you are today shipping your spodumine to China to be made into lithium hydroxide then that's, if China does turn out to be a foreign entity of concern, that will disqualify that material for the tax credit. So right now, it is going to be qualified, but as …”