Hyundai Lobbies US to Ease EV Rule That Hurts Foreign Carmakers | Tech News

Hyundai Lobbies US to Ease EV Rule That Hurts Foreign Carmakers

Hyundai Motor Co. and the South Korean government are ratcheting up lobbying to loosen restrictions.

By:BLOOMBERG
| Updated on: Oct 19 2022, 20:31 IST
Hyundai
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.  (Unsplash)

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 $7,500 consumer tax credit to electric vehicles 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 $25 billion in US investment since Biden took office. That means the US 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. 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 $5.5 billion 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 US with popular electric models like the Ioniq 5 and Kia EV6.

Hyundai has sold more than half a million cars in the US 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 program 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 electric vehicle hub.

The company argued the bill should be in line with South Korea's free trade agreement with the US by treating batteries, critical minerals and vehicles manufactured or assembled in Korea equally to those produced in the US.

The tax provision was enough to make Hyundai consider scraping its Georgia project and moving it to Mexico for cheaper labor, according to a person familiar with the company's thinking. But now it's moving swiftly 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.

The law “severely limits EV access and options for Americans and may dramatically slow the transition to sustainable mobility in this market,” Hyundai said in a statement. “We support solutions to ensure a level playing field for customers and workers as we seek to grow the EV market in the U.S.”

The Inflation Reduction Act has other requirements that will prove challenging for automakers, which rely on global supply chains. The bill denies a subsidy after 2023 to automakers that use battery components manufactured in China and other “foreign entities of concern.”

Beginning in 2025, that prohibition extends to the use of any critical mineral in a battery that is extracted or processed by those countries. Also, to get the full value of the credit, an increasing amount of the vehicle's battery components are required to be manufactured in North America.

Manchin and other proponents have argued the provisions were necessary to create jobs in the US and make the country more self-sufficient.

“Our goal here is to make sure we are building a sustainable market here in the United States for electric vehicles,” Deputy Treasury Secretary Wally Adeyemo told reporters earlier this month.

Reinforcing that stance, Manchin's spokesperson, Sam Runyon, said the law “includes tough but achievable requirements that will increase energy and national security while also creating more jobs here at home.”

Korean trade ministers have also been pressing their case for more lenient provisions or an extended timeline to meet requirements, according to Thomas Byrne, president of the Korea Society, a non-profit that works to help foster US-Korean relations.

Hyundai's Executive Chairman Euisun Chung, who is also the grandson of the founder, is going to Savannah, Georgia, for the EV plant's groundbreaking later this month, as is White House National Climate Adviser Ali Zaidi, according to the person familiar with the matter, who wasn't authorized to discuss the plans publicly.

Given the scope of the bill and the quick timeline in which it was passed, Congress will probably have to pass another measure addressing drafting errors and other problems that crop up, said Alex Muresianu, a policy analyst at the right-leaning Tax Foundation. That could take several years.

“There's only so much that Treasury can do to remedy these problems,” Muresianu said.

Senator Raphael Warnock, a Georgia Democrat in a close re-election race, proposed legislation to delay some requirements. But it's unlikely to pass without the support of Manchin, among others.

Despite the challenges, Hyundai still sees some wiggle room, Randy Parker, chief executive officer of Hyundai Motor America, told reporters earlier this month.

“There's other solutions we're looking at, other provisions within the act, in the IRA bill itself that give us an opportunity to continue to sell EVs,” Parker said. “We're gonna land in a really good place.”

Catch all the Latest Tech News, Mobile News, Laptop News, Gaming news, Wearables News , How To News, also keep up with us on Whatsapp channel,Twitter, Facebook, Google News, and Instagram. For our latest videos, subscribe to our YouTube channel.

First Published Date: 19 Oct, 19:30 IST
Tags:
NEXT ARTICLE BEGINS