Hyundai Motor Group faces uphill battle in US EV market

The Korea Times

The Korea Times

Business

Sat, September 23, 2023 | 13:13

Companies

Hyundai Motor Group faces uphill battle in US EV market

Posted : 2023-04-18 16:54

Updated : 2023-04-19 15:34

Hyundai Motor's IONIQ 5 electric car / Courtesy of Hyundai Motor

Korean auto giant not eligible for $7,500 tax credit

By Baek Byung-yeul

Hyundai Motor Group is facing an uphill battle in the U.S. market for electric vehicles (EV), because its car brands ― Hyundai Motor, Kia and Genesis ― were not included on a list of EVs eligible for up to $7,500 in subsidies granted by the U.S. Inflation Reduction Act (IRA), according to industry officials, Tuesday.

Previously, EVs could qualify for the tax credit as long as they were assembled in North America, but they had to meet stricter battery requirements.

However, detailed guidance measures released last month guarantee only a $3,750 subsidy for EVs that use at least 50 percent of battery components manufactured and assembled in North America, even if the vehicles were assembled in the region. Another $3,750 is available when at least 40 percent of key minerals used in the batteries are mined and processed in the U.S. or its free trade agreement partners.

Under the detailed guidelines of the IRA, EVs manufactured by Hyundai did not make the list. The Electrified GV70, an SUV model of the group's luxury brand Genesis, was also excluded as it is equipped with Chinese batteries.

In addition to Hyundai Motor Group's EVs, other brands such as Nissan, which was eligible for the subsidy because it has factories in North America, were also dropped from the list. The eligible cars are made by American brands such as Tesla, Ford, GM and Stellantis.

In response, Hyundai Motor Group said it plans to increase EV production in the U.S. over the long term, aiming to become a leader in the market for such vehicles. The group added it will actively utilize lease sales that qualify for tax credits.

"The U.S.-assembled Electrified GV70 is no longer eligible for the EV tax incentive when purchased by consumers. However, it does receive the tax credit when leased and Genesis passes that on to consumers with more attractive lease pricing," a spokesman for the group said.

"Genesis continues to aggressively execute its long-range plan to be an industry leader in EV production and sales in the U.S. and will utilize key provisions in the Inflation Reduction Act to accelerate the transition to electrification," the official added.

Kim Pil-soo, an automotive technology professor at Daelim University College, said that the exclusion of Hyundai Motor Group's EVs from the tax subsidy list was expected and is not anticipated to have a significant impact.

"The industry expected Hyundai's EVs to be excluded from the IRA subsidies. The conditions for receiving subsidies have become more stringent, resulting in not only Korean cars, but also Japanese and German cars being excluded this time. It could be a problem if other foreign automakers receive subsidies, while only Korean cars are excluded. But except for American brands, everyone else is excluded, so it is not expected to have a significant impact on Hyundai Motor Group," the professor said.

But, Kim added that the group should try to make its EVs receive subsidies quickly there, because the brand competing in the market is Tesla instead of other foreign rivals.

"However, it is regrettable that Tesla, which Hyundai needs to catch up with, will receive subsidies and solidify its leading position in the market. Hyundai should quickly replace the excluded Genesis GV70, which uses Chinese batteries, with Korean-made batteries. Additionally, the completion of an EV factory being built in Georgia should be expedited," he said.

baekby@koreatimes.co.kr