Biden Administration Promises to Review New EV Credit Impact on South Korea
Image: Hyundai
The new criteria for electric vehicle federal tax credits has hit certain automakers harder than others, and the ones that feel disproportionately inconvenienced are speaking out. South Korea National Security Adviser Kim Sung-han met with his U.S. counterpart Jake Sullivan in Hawaii on Wednesday amid recent concern over the Inflation Reduction Act from Hyundai chairman Chung Eui-sun.
Kim said early Thursday that the Biden administration has pledged to review the new law’s impact in the coming months, according to South Korea’s Yonhap News Agency by way of Reuters. From the report, in Kim’s words:
“[Sullivan] said the [Inflation Reduction Act] is likely to bring more pluses than minuses to Korea, but he would take a closer look at how the electric vehicle subsidy issue will develop going forward and what impact it will have,” Kim was quoted as telling reporters.
If that’s what Sullivan actually said, it’s not necessarily wrong. LG Energy Solution and SK Innovation are two of some of the most prominent EV battery suppliers in the world, and they’re both headquartered in South Korea.
Both have started operating or broken ground on American battery factories — not to mention the odd joint venture — which will satisfy the domestic origin component requirement as those terms of the Inflation Reduction Act ramp up through the latter part of this decade. Hyundai, too, will one day manufacture models like the Ioniq 5, Kia EV6 and future EVs in Georgia — but construction isn’t slated to begin on that facility until next year.
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That’s the issue. Eventually, South Korea’s automakers and suppliers will benefit from this. But right now, at this critical moment when Hyundai is making every effort to establish itself as producer of desirable EVs, right after those EVs have hit the market, the made-in-America requirement stings.
And so the South Korean government is very concerned, arguing that the Inflation Reduction Act’s stipulations are discriminatory and that it may violate bilateral fair-trade agreements with the United States. Vice Foreign Minister Lee Do-hoon requested that the Biden administration delay the enforcement of the criteria until Hyundai cuts the ribbon on that Georgia factory sometime in 2025. Seeing as how the new rules are already in effect, that seems unlikely. A special exemption for the automaker might stand a better chance, a UBS analyst theorized last month.
