Photo: Ministry of Industry holds a town hall in response to the Inflation Reduction Act of the United States. Credit: Ministry of Trade, Industry and Energy.
One of the most significant provisions of the Inflation Reduction Act (IRA) of the United States, signed by US President Joe Biden on August 16, is a significantly expanded tax credit for electric vehicles (EVs). Previously, the tax credit was between USD 2.5k to 7.5k, depending on the number of units sold in each given EV model. The IRA removed the modifier, giving the USD 7.5k tax credit no matter how many cars have been sold. But the removal came with a catch: to receive the credit, the car has to be manufactured in North America.
The loss of EV tax credit is a major blow to the Hyundai Motor Group 현대자동차그룹, which holds the second-largest EV market share in the United States (9%) following Tesla. Hyundai Motor sells five EV models - Ionic 5 and Kona EV under the Hyundai badge, EV6 and Niro EV under Kia 기아, and GV60 under the Genesis 제네시스 insignia. All of them are produced in South Korea and exported to the United States, making them ineligible for the tax credit. Although Hyundai will begin producing GV60, a luxury SUV, out of its factory in Alabama in November, other mass-market models cannot be produced in the US until late 2024 at the earliest.
Many of South Korea’s politicians expressed outrage. Noting that Hyundai Motors had pledged to invest USD 10b in the United States just three months ago in May, Deputy Speaker of the National Assembly Jeong Jin-seok 정진석 국회부의장 called the IRA “a strike in the back of head” 뒤통수를 맞다, or a stab in the back. Foreign Minister Park Jin 박진 외교부장관 lodged a protest with his US counterpart Tony Blinken.
Industry Minister Lee Chang-yang 이창양 산업통상자원부 장관 said his ministry is “actively considering” a lawsuit at the World Trade Organization. Still others have panned it as yet another instance of Yoon Suk-yeol 윤석열 administration’s ineptitude in foreign policy, giving away South Korea’s advantages while receiving nothing in return. (See previous coverage, “Yoon’s NATO Embarrassment.”)
