U.S. EV subsidy rule delay may buy time for Korean carmakers

Battery component rules for U.S. electric vehicle subsidies have been delayed, meaning that more Korean vehicles could qualify.

An electric vehicle is at a charging station in Gwangmyeong, Gyeonggi. [YONHAP]

Battery component rules for U.S. electric vehicle subsidies have been delayed, meaning that more Korean vehicles could qualify.

The rules will be issued in March.

Battery component requirements under the Inflation Reduction Act (IRA) were scheduled to go into effect on Jan. 1, 2023. It will be published three months later by the U.S. Treasury Department.

Until then, EVs that fail to meet the battery requirement are likely to be eligible for the tax credit.

The Treasury will release initial guidance on “the anticipated direction of the critical mineral and battery component requirements” by the year’s end, and “issue a notice of proposed rulemaking in March” with detailed guidelines on tax implementation.

The Treasury added that “additional guidance on clean vehicles for consumers and manufacturers is forthcoming,” but did not provide details on the date of the release.

Korea is concerned because the IRA prohibits subsidies for purchases of EVs made outside the United States or with batteries made with Chinese minerals or components. Hyundai Motor and Kia both make EVs in Korea.

The government has been in discussion with U.S. officials on the IRA requirements and submitted two written opinions to Washington on the matter.

The IRA, signed by U.S. President Joe Biden in August, grants up to $7,500 in tax credits to buyers of electric vehicles assembled in North America.

Under the terms of the IRA, buyers of EVs assembled in the United States are eligible for a $7,500 tax credit for vehicles purchased after Aug. 16, 2021, extending an existing program that offered a $7,500 tax credit for EV purchases regardless of origin.

When the tax provision on battery components is implemented after March, 40 percent of critical-mineral value will have to come from the United States or countries that the United States has signed free trade agreements with to qualify for $3,750 of the credit.

That number increases 10 percentage points a year to 80 percent in 2027.

Fifty percent of battery-component value will have to come from the United States to qualify for another $3,750 of the tax credit. That number will increase 10 percentage points a year to 100 percent by 2029.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]