Hyundai Motor Co. is seeking various ways to make its electric vehicles sold in the US qualify for tax credits after its Electrified GV70 was denied access to government subsidies under stricter requirements.
Hyundai’s GV70 EV sold under the carmaker’s premium Genesis brand was recently named among the electric models ineligible for a $7,500 tax credit for battery sourcing.
Under the US government’s new, tougher rules announced on Monday, not a single electric model from a foreign brand is now eligible for subsidies.
The US Treasury Department and other government agencies said that only 22 models, down from 39 electric or plug-in hybrid models previously, are now eligible for a full or partial tax credit, based on new thresholds that require a certain percentage of the battery parts and minerals to come from a qualifying country.
Car buyers looking to get a tax break on a new electric vehicle will now have to choose from four US brands – Tesla Inc., Ford Motor Co., General Motors Co. and Stellantis N.V., which owns Jeep and Chrysler.
The latest changes adopted under the broader Inflation Reduction Act (IRA) will be effective on Tuesday.
Korean battery makers stand to gain from the stricter US tax credit requirements Foreign vehicles losing credits are Hyundai’s Electrified GV70, the BMW 330e, BMW X5 xDrive45e, Nissan Leaf, Rivian R1S and R1T, Volkswagen ID.4 as well as the plug-in hybrid electric Audi Q5 TFSI e Quattro and plug-in hybrid electric (PHEV) Volvo S60.
The rules are aimed at weaning the US off dependence on China for EV battery supply chains and are part of President Joe Biden’s effort to make 50% of US new vehicle sales by 2030 EVs or PHEVs.
The IRA requires that 50% of the value of battery components be produced or assembled in North America to qualify for a $3,750 subsidy. It also requires that 40% of the value of critical minerals be sourced from the US or a free trade partner for another $3,750 credit.
The law, enacted last August, requires vehicles to be assembled in North America to qualify for any tax credits.
Foreign brands, which are denied access to US tax benefits, will qualify if and when they meet the latest requirements.
NEW RULES FALL HARD ON FOREIGN BRANDS
The recently announced tougher rules have fallen hard on automakers, which import vehicles or use batteries manufactured in China.
Hyundai, South Korea’s top automaker, assembles the GV70 at its Alabama plant but uses batteries made in China by Korea’s SK On Co. The vehicle was initially on the US subsidy list but excluded due to the stricter requirements.
The GV70 by Genesis, Hyundai Motor Group's luxury line Hyundai said it is striving to make the most of the key provisions in the IRA to accelerate its transition to electrification while advancing operations of its new EV plant under construction.
The Korean carmaker already said it will move up the start of its $5.5 billion EV plant in Georgia to the second half of 2024 from an original plan for 2025. The factory could begin operations as early as August 2024, industry sources said.
Kia Corp., another car-making unit of Hyundai Motor Group, plans to roll out its latest EV9 model at its US plant as early as the first of next year. Hyundai Motor plans to build its IONIQ 6 in the US in the first half of 2024.
Industry officials said the slimmed-down list could put a dent in demand for EVs, which are still more expensive than internal-combustion engine cars.
“What it does is make you uncompetitive in the near term with other companies that were always here,” said Steven Center, chief operating officer of Kia’s US operations. “It is really a terrible thing for the whole industry.”
Samsung Securities analyst Yim Eun-young said the strengthened IRA tax credit requirements could have limited impact on Hyundai and Kia given that most of their rivals are also excluded from subsidies.
“Tesla and BMW’s main models, which compete with Hyundai and Kia, are also excluded. As such, the Korean brands are 30% price competitive over them. If Hyundai’s US plant is up and running earlier than scheduled, it will serve as a bonus,” she said.
Meanwhile, Korea’s three major battery makers – LG Energy Solution Ltd., Samsung SDI Co. and SK On – stand to benefit from the strengthened US requirements.
They are supplying batteries to 17 of the 22 auto brands that qualify for tax credits.
