View of the export loading dock at Hyundai Motor’s Ulsan plant (Image courtesy of Yonhap)
SEOUL, April 18 (Korea Bizwire) — The South Korean government announced on Tuesday that it will engage in discussions with its American counterparts to ensure that Korean companies can benefit from the Inflation Reduction Act (IRA) policy in the future. This comes in response to Hyundai and Kia’s exclusion from the list of electric vehicles eligible for subsidies under the detailed guidelines of the IRA in the United States.
The exclusion of these two models from the tax credit has prompted a flurry of explanations from government officials amid speculation that exports of electric vehicles and batteries to the North American market will come to a halt.
“Upon closer examination, the impact on Korean EV exports may not be as severe as initially thought, and the new battery mineral and component requirements could represent a significant opportunity for the three Korean battery companies,” said Choi Sang-mok, chief economic adviser to the presidential office. “We can do well until we start mass production in the second half of next year,” he added, referring to the dedicated EV plant Hyundai is building in the U.S. state of Georgia.
On the same day, an official from the Ministry of Trade, Industry and Energy told Yonhap News Agency, “The outcome, which excluded Hyundai and Kia from subsidies, was foreseen when the U.S. issued detailed guidelines for battery components and mineral requirements on March 31.”
South Korea’s pro-government conservative media outlets have pointed out that not only South Korean but also Japanese and EU automakers were excluded from subsidies, suggesting that while South Korean companies will be at a disadvantage in the North American market, the impact may not be as severe.
On April 17 (local time), the U.S. government announced 16 EVs (22 including sub-models) that will be eligible for subsidies, none of which are from foreign companies, including Hyundai and Kia.
“The reduction in the number of vehicles eligible for the credit and the amount of the credit since the IRA detailed guidance came into effect does not appear to be a significant detriment to our automotive industry’s ability to compete in the U.S. market,” the ministry explained in a position paper.
The ministry also noted that all foreign vehicles that compete with Hyundai and Kia in the U.S. market, as well as some U.S. car models, were excluded from the subsidy. It also stated that electric vehicles sold for commercial purposes, such as leasing, are not subject to the requirement to be assembled in North America, explaining that South Korean automakers have been taking advantage of the provision locally.
M. H. Lee (mhlee@koreabizwire.com)
