Miners, supply chain watching fate of EV tax credit

President Donald Trump's plan to revoke a $7,500 tax credit for electric vehicles could hinder his own efforts to invigorate domestic supply chains, but miners remain confident there will be demand for their product.

Under the Inflation Reduction Act (IRA), consumers became eligible for a tax credit worth up to $7,500 per vehicle if it meets certain thresholds for the percentage of battery components and critical minerals sourced or processed within the US or by one of its free trade partners. While removing the credit would require an act of Congress, Trump has issued an executive order that called for "considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs," which appears to target the tax credit.

Meanwhile, Chinese and Russian industrial policies are weighing against US efforts to onshore its supply chain by cornering mineral markets and preventing Western producers from building alternate supply sources, Conor Bernstein, a spokesperson for the National Mining Association, told S&P Global Commodity Insights.

"The administration and Congress are going to align existing credits and the tax code with their priorities," Bernstein said. "What we have said — and continue to communicate to the administration and Congress — is that defanging Chinese weaponization of mineral supply chains requires acknowledgment of unfair trade practices and the need to level the playing field for US producers."

The $7,500 tax credit lowers the barrier of entry into electric vehicles, where higher upfront costs can turn away price-sensitive consumers. Undermining incentives for electric vehicles will hamper efforts to bring other parts of the supply chain to the US, Dustin Mulvaney, an environmental studies professor at San Jose State University, told members of the House Natural Resources Committee in testimony on Feb. 6.

"Developing critical minerals supplies would be strengthened by maintaining policies to encourage electric vehicles, including the Clean Car rule and Inflation Reduction Act incentives," Mulvaney said. "But uncertainty about the fate of these laws and policies sends signals to buyers that perhaps demand for lithium and other key battery parts do not materialize."

Syrah Resources Ltd. owns and operates a graphite active anode material processing facility in Louisiana that is vertically integrated with the company's mining operation in Mozambique and provides materials to battery makers. In an emailed statement, a company representative told Commodity Insights that Syrah has benefited from funding, tax credits and policy support under the Inflation Reduction Act.

"The situation is certainly making for a very dynamic environment for investors in this space," the company said. "I imagine it's hard for investors to take a considered view given the policy outcomes are uncertain."

In a pre-election securities filing, Syrah compared the likely fate of beneficial policies under Republican and Democratic administrations. While it expected tariffs and two tax credits under the IRA to survive in both scenarios, only the electric vehicle tax credit was a question mark.

However, Syrah pointed out that there are other elements of Trump's agenda that will be supportive of mining. Trump's executive orders have included supporting the development of domestic minerals extraction and processing as well as stockpiling critical minerals. The administration's support for developing datacenters for artificial intelligence technology will also drive demand for energy storage, another segment of the economy dependent on critical minerals, noted Megan O'Connor, CEO of Nth Cycle Inc., a company that refines critical minerals from electronics, mine waste and other feedstocks.

"It's important to understand that the demand for critical metals extends far beyond any single industry, and Nth Cycle's solution refines the full spectrum of critical metals in order to support multiple industries," O'Connor said. "We're currently producing nickel and cobalt, which are mandatory components for the entire modern economy and national security — not just EVs — including consumer electronics, public transportation, defense systems, and grid-scale energy storage.

Trump's closeness to Elon Musk, the CEO of electric vehicle giant Tesla Inc., may not go very far in convincing Trump not to pursue a reversal of the credit.

In a Feb. 3 tweet, Tesla touted that its 2025 Cybertruck now qualifies for the credit, and the company maintains a list of credit-eligible vehicles on its website. However, when asked about the potential reversal of electric vehicle policies during a Jan. 29 earnings call, Musk dismissed its potential impact.

"At this point, I think that sustainable transport is inevitable. I'm highly confident that all transport will be autonomous electric, including aircraft, and that it simply — it can't be stopped any more than one could have stopped the advent of the external combustion engine, steam engine, or one could have stopped the advent of the internal combustion engine," Musk said. "You can't stop the advent of electric cars. It's going to happen. The only thing holding back electric cars was range, and that is a solved problem."

Texas-based International Battery Metals Ltd. CEO Iris Jancik said that lithium demand from electric vehicles is expected to continue to increase despite the tax policies of any one country. The direct lithium extraction company also expects demand for lithium to continue to rise as more utility-scale battery storage is deployed.

"While repealing EV subsidies could temporarily mute EV sales, it also heightens the need to invest in new, proven technologies, like our proprietary direct lithium extraction that produces commercial-scale lithium with lower CAPEX and OPEX and more sustainably," Jancik said in a statement to Commodity Insights. "To build out a domestic lithium industry, producers need to focus on driving down the cost of lithium extraction and processing, which would lower the cost of EV batteries and EVs."