Hyundai, Kia fail to make IRA tax credit list

Hyundai Motor and Kia failed to make the list of beneficiaries for a major U.S. tax credit, a setback for Korean automakers in their competition with Tesla and other U.S. makers of electric vehicles.

A Hyundai Motor employee works at its manufacturing plant in Montgomery, Alabama [HYUNDAI MOTOR]

Hyundai Motor and Kia failed to make the list of beneficiaries for a major U.S. tax credit, a setback for Korean automakers in their competition with Tesla and other U.S. makers of electric vehicles.

The U.S. Treasury Department on Monday released a list of 16 EVs — all made by U.S. manufacturers — that will qualify for a maximum of $7,500 subsidy under the Inflation Reduction Act (IRA).

The announcement came just a week before President Yoon Suk Yeol's scheduled state visit to the United States, raising the possibility of the issue being on the summit agenda.

The number of eligible models was slashed from the previous 40 as the U.S. government applied specific battery and mineral rules.

Under the IRA, electric vehicles are eligible for the subsidy only if they are assembled in North America. The rules also restrict the origin of battery components and minerals, an attempt to exclude China.

Hyundai and Kia will be ineligible for any credit, at least for several years, as they have no EV factories in the U.S.

Hyundai's electric version of GV70 was not on the list, either. Although the car is manufactured at the company's Alabama plant, its batteries are made in China.

Hyundai and Kia's EV sales in the United States have fallen since the IRA went into effect in August last year.

Hyundai sold 2,114 units of the Ioniq 5 in the U.S. market last month, down 22 percent on year. Kia's EV6 sales plunged 68 percent in March.

Hyundai will focus on its lease-related business as a breakthrough to maintain its shares in the U.S. market. Leased EVs also qualify for the IRA tax credit, even if they were not assembled in North America.

"What we can do now is do our best with the leased programs and accelerate the local plant that is under construction," Hyundai Motor CEO Chang Jae-hoon said.

Hyundai is working to open the Georgia plant by the second half of 2024.

The Korean government, however, believes the list is not entirely disadvantageous to Korean companies and rather favorable to battery makers.

"It's not too bad for Korea's electric vehicle exports," Choi Sang-mok, senior presidential secretary for economic affairs, said at a press briefing Tuesday. "Hyundai's Georgia plant will start mass production in the second half of 2024, so its vehicles will be eligible for the credit by then."

"Of 22 vehicles on the list [including plug-in hybrids], 17 models use batteries made from LG Energy Solution, Samsung SDI or SK On," Choi added. "So Korea has now become a beneficiary country for battery exports."

Hyundai Motor shares fell 1.9 percent to close at 191,400 won ($145) Tuesday, with Kia declining 2.13 percent.

BY SARAH CHEA [chea.sarah@joongang.co.kr]