When the 'One Big Beautiful Bill' (OBBB) passed, most of the debate centered around its social and political dimensions. But beneath those headlines, there's been a notable intensification of US efforts to scale its mineral and battery industries in ways that will have broader implications for the industry.
The rollback of federal EV incentives may temper adoption in the short term, but demand for electric vehicles continues to grow. EVs continue to represent a major share of lithium consumption, and the reality is that domestic supply still lags far behind even this baseline demand.
What’s striking, however, is that EVs are no longer the sole driver of the lithium market. A wave of new industries are rapidly expanding their reliance on advanced energy storage and minerals, compounding the pressure on supply chains:
These forces highlight a simple truth: even if EV demand plateaus, total lithium demand is accelerating. This is why Washington is prioritizing domestic supply chains across mining, processing, and recycling, not only to catch up with today’s EV-driven shortfall, but to prepare for the much broader lithium economy of tomorrow.
The 45X Advanced Manufacturing Production Credit originated under the IRA in 2022, and is designed to strengthen US clean energy manufacturing and reduce reliance on foreign supply chains. The incentive structure varies between mineral producers and battery manufacturers:
Under the 'One Big Beautiful Bill', credit access now requires compliance with significantly more stringent sourcing rules.
Qualifying for 45X tax credit has evolved from requiring domestic production to meeting strict sourcing requirements, pushing manufacturers to restructure their supply chains.
Beginning in 2026, manufacturers must navigate two major hurdles:
1. Prohibited Foreign Entity (PFE) Restrictions:
At least 60% of material costs must come from non-PFE sources, reaching 85% by 2030. PFEs include entities owned or influenced by China, Russia, Iran, or North Korea. Given China's dominance in critical mineral processing, especially lithium, this creates significant compliance challenges while creating opportunities for non-Chinese suppliers.
2. Domestic Content Requirements:
Starting in 2027, key components such as modules from gigafactories need at least 65% of material costs sourced from US-produced or mined materials to qualify for the credit. This raises the standard for eligible components, further encouraging localized material supply chains.
The intersection of these sourcing rules creates a strategic opportunity for lithium recyclers. While lithium may only represent 8–15% of a cell's material cost, it becomes a high-leverage factor under the combined non-PFE and domestic content mandates. Domestically recycled lithium can simultaneously satisfy both requirements, positioning it as a critical enabler for unlocking the 45X credit.
With the OBBB in force, manufacturers must build compliance into their supply chains as a foundational element. Access to the 45X credits depends on strategic sourcing, traceability, and alignment with the new guidelines.
Overall, the US government treats critical minerals, such as lithium, not just as industrial inputs, but as assets of strategic importance. As geopolitical competition intensifies and global supply chains remain fragile, the US domestic capacity for extracting, refining, and recycling battery materials increasingly becomes a national priority.
To further demonstrate this, the federal government is deploying substantial funding to strengthen the US critical minerals ecosystem through three primary channels:
For lithium recycling, this represents a particularly favorable moment. Federal funding is flowing toward exactly the capabilities that recyclers provide: refining, processing, and developing domestic supply. Recycling has evolved from a sustainability consideration to a core US supply chain strategy component.
The next decade represents an exceptional period, especially for lithium recycling. With new compliance requirements, strategic demand, and aligned federal policy, recycling has evolved from a sustainability play into a critical component of national security. The policy framework and funding mechanisms now in place create sustained incentives through the early 2030s, making this the defining period for establishing a significant position in the US domestic materials landscape.