- Credits in climate law gives Korean company’s rivals advantage
- Provisions aimed at bolstering EV manufacturing in US
According to Bloomberg’s article published on October 19, 2022, Hyundai Motor Co and the South Korean government are ratcheting up lobbying to loosen restrictions that senator Joe Manchin fought to include in this year’s US climate law, arguing the rules could blunt the automaker’s rapid growth in the market.
At issue is a requirement to limit a US$7,500 (RM35,400) consumer tax credit to electric vehicles (EVs) built in North America, since Hyundai won’t have an EV plant there until 2025.
Democrats included the provision in the landmark climate bill to win support from Manchin, a West Virginia senator who wanted to ensure the tax credit would lead to domestic investment.
Depending on how the Biden administration chooses to interpret the law, the rule could leave Hyundai and some other foreign automakers at a disadvantage against EV makers eligible for the credit.
South Korea is home to three of the world’s largest EV battery manufacturers, which announced US$25bil (RM118bil) in US investment since Biden took office.
That means the United States must decide how to placate an important trade partner and supplier without running afoul of the bill’s intent.
While they aren’t alone – US and European carmakers are also chafing against various aspects of the bill – the South Koreans have been particularly outspoken.
Ever since the legislation was passed, South Korean trade ministers and members of its assembly have reached out to their US counterparts in Washington to lobby for more time before the restrictions kick in, either through legislation or regulation.
South Korean president Yoon Suk Yeol and other officials have brought up the issue in meetings with president Joe Biden and vice-president Kamala Harris as well.
Automakers like Ford Motor Co, General Motors Co (GM) and Volkswagen AG already have battery and EV plants up and running in North America, but Hyundai is only about to break ground on a US$5.5bil (RM26bil) facility in southern Georgia.
That gives competitors a head start of about three years over Hyundai and its sibling Kia brand, which has been expanding its market share in the United States with popular electric models like the Ioniq 5 and Kia EV6.
Hyundai has sold more than half a million cars in the United States through the third quarter of 2022, including 44,544 pure EVs, putting it ahead of Ford and GM’s EV sales, according to researcher Cox Automotive.
Even Tesla Inc chief executive officer Elon Musk has acknowledged the company’s success.
Hyundai is seeking a delay in the requirement for North American manufacturing to buy time to catch up, according to a person familiar with the automaker’s thinking.
“A sudden change of the subsidy programme for EVs would be an unexpected hurdle that we need to overcome in order to construct a sound and solid EV business in the United States,” Young-Woon Kong, president of Hyundai Motor Group, wrote in an Aug 10 letter to Representative Buddy Carter, a Georgia Republican whose district includes the site of the new EV hub.
The company argued the bill should be in line with South Korea’s free trade agreement with the United States by treating batteries, critical minerals and vehicles manufactured or assembled in South Korea equally to those produced in the United States.
The tax provision was enough to make Hyundai consider scrapping its Georgia project and moving it to Mexico for cheaper labour, according to a person familiar with the company’s thinking.
But now it’s moving to build the factory, and training its lobbying power on the Biden administration – including the Treasury Department, which is crafting guidance on implementing the tax credits.
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Published on October 20, 2022 4:13 PM (GMT+8)Last Updated on October 20, 2022 4:13 PM (GMT+8)
