In August 2022, the United States passed the Inflation Reduction Act of 2022 (IRA), which includes a controversial incentive to accelerate the adoption of electric vehicles (EVs) produced domestically. The new clean vehicle tax credit provides a subsidy of up to USD 7,500 starting in 2023 for eligible EVs that are assembled in North America and meet domestic sourcing requirements for both the battery components and critical minerals contained in the vehicle—the first time green subsidies have been explicitly linked to local-content requirements by a major trading economy.

As highlighted in this year’s AREO, the EV industry is an emerging growth sector, especially for ASEAN economies aiming to be key production hubs for the region. This analytical note examines the potential implications of the IRA for the ASEAN+3 EV industry and members’ growth strategy going forward.