Hyundai, Kia's EV dreams in US shattered by Joe Biden’s new policy
PremiumUS President Joe Biden signed a law in August that disallows Hyundai and Kia from receiving federal tax credits.
Hyundai Motor and Kia are the manufacturers that stand to suffer the most from new regulations that stop subsidies for EVs built outside of North America after climbing to No. 2 in the US electric car market with fashionable, long-range models.
The Ioniq 5 and EV6 models are produced by these two businesses. Between January and July, they outsold Ford Motor, Volkswagen AG and General Motors by selling more than 39,000 electric vehicles (EVs) in the US, more than doubling their sales from the same period in 2017.
However, because Hyundai Motor and its affiliate Kia are not yet producing EVs in North America, the Inflation Reduction Act, which US President Joe Biden signed into law in August, disallows them from receiving federal tax credits. This will likely put an end to their EV ambitions, at least in the short term.
The $5.5 billion EV plant in Georgia was among the over $10 billion in US investments that Hyundai Motor Group announced three months ago. In May, Biden expressed his gratitude to Hyundai for choosing to invest in the United States and said his administration would not “disappoint" the company.
Under the new regulations, just 20 EVs, including models from Ford, BMW, and starting in 2023, GM and Tesla are eligible for incentives. The regulations also outline specifications for EV battery materials and part sourcing beginning in 2023.
Other foreign automakers, like Toyota Motor, would also be affected by the law but have less at stake because they sell fewer vehicles or have a lesser market share.
"If all things are equal and if I buy this one I get a $7,500 tax credit and if I buy that one I don't, I love you Hyundai but I'm going to go with the one where I can get a tax credit," said Andrew DiFeo, a Florida-based dealer who has seen a few potential customers already drop Hyundai EVs as a preference.
According to a representative of a significant Hyundai supplier who has met with senior executives at the company, the law caught the manufacturer off guard.
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"So much for not letting us down," said the person, who spoke on condition of anonymity. "It's a big mess."
Analysts said it was too soon to estimate how much the new regulations will cost the businesses in revenue and profit, but several said they were likely to employ incentives to draw in American customers, which might increase expenses.
On August 16, the day after Biden signed the Act, shares of Hyundai and Kia decreased by about 4% each. Since then, the stocks have recovered.
(With Reuters inputs)
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