South Korean officials and leaders from Japan are expressing concerns over the new US EV tax credit requirements that kick in at the end of the year. New reports are surfacing that Japan and South Korea will request flexibility in the rule changes. Will they get their way, paving the way for automakers like Toyota, Hyundai, and Kia electric vehicles to qualify?
The Biden Administration passed the landmark Inflation Reduction Act (IRA) in August, introducing a new set of incentives to buy an electric vehicle with up to $7,500 in tax relief.
However, for an automaker’s EV model to qualify, it must meet strict battery sourcing and assembly requirements. Half of the tax credit ($3,750) is concerning using critical EV battery minerals, which states at least 40% of the value of the minerals used must be manufactured or assembled in the US or with its free trade partners.
The other half ($3,750) covers the EV battery components, requiring at least half the value to be manufactured or assembled in North America. Although the initiative is driving significant manufacturing investments in the US (+$40 billion) and job creation (+642,000 jobs added since 2021), several leaders believe it’s unfair for foreign automakers.
South Korean automaker Hyundai, in particular, has expressed concerns over the upcoming changes. Hyundai had already announced its plans to build a $5.5 billion mega EV facility in Georgia in May before the IRA was passed. Since the new climate initiatives passed in August, South Korean officials have lobbied with US leaders for a grace period to be included in the tax credit, expressing major concerns. Nonetheless, Hyundai accelerated its construction plans, breaking ground on October 25, 2022, rather than early next year.
South Korean officials are not the only foreign leaders concerned with the new rulings. The EU has also asked the US to allow European automakers to qualify for the tax credit. New reports are surfacing that South Korean officials and leaders from Japan are asking for more flexibility for non-American carmakers.