As the subsidy of up to $7,500 (about 10 million won) per unit in North America for electric vehicles of Hyundai Motor and Kia ceased, the local sales strategy took an emergency.
On the surface, the Inflation Reduction Act is central to responding to climate change by injecting a large budget to reduce greenhouse gas by 40% compared to 2005 by 2030. In the same vein, the contents of the abolition of the subsidy payment limit, which had been limited to 200,000 units per year per company to expand the supply of eco-friendly vehicles, are also included.
However, a closer look tells a different story. Analysts say that the law is actually aimed at protecting the country’s industry while setting the subsidy payment standards too strict.
Under the Inflation Reduction Act, the subsidy is limited to vehicles assembled in North America. Starting from next year, it also includes the provision of differential subsidies depending on how much ‘North American’ ratio is used for batteries and core minerals.
Hyundai’s strategic electric vehicle models, the Ioniq 5 and Kia EV6, which are currently unavailable in the United States, are all produced in Korea. The same goes for Kona EV, Niro EV, and GV60.
In this situation, according to the enactment of the Inflation Reduction Act, US consumers will have to pay up to 10 million won more than before when purchasing a Korean electric vehicle. This means that the price competitiveness of domestic electric vehicles is falling.
A setback is inevitable even with plans to lead the US electric vehicle market with the Ioniq 6 and EV9, which are about to be released next year.
Hyundai Motor Company previously announced that it would build an electric vehicle-only plant with an annual capacity of 300,000 units in Georgia, USA, and is scheduled to be completed in 2025, creating a gap of at least three years. It is known that the GV70 electric model will be produced at the Alabama plant in the US from the end of this year, but the industry points out that the demand for premium lines such as the GV70 is bound to be limited.
An industry official said, “As the inflation reduction law is a national policy issue, it will not be easy for individual companies to find a countermeasure.”
Experts pointed out that it is necessary to respond not only to the automobile industry but also to the national level as the export competitiveness of the domestic automobile industry may be weakened.
Kim Pil-su, a professor of automobiles at Daelim University, said, “The inflation reduction law is a very frightening bill that will nullify the FTA. should be responded to,” he said.
“Hyundai should also hurry up with the labor union to discuss the production of electric vehicles overseas,” he added.
The Korea Automobile Research Institute also reported in its report, “It is important for companies and the government to point out the problems of the US Inflation Reduction Act and demand corrections and supplements. It is necessary to jointly prepare the
There are also voices that it is important for companies to move quickly.
Ho-geun Lee, a professor of automobiles at Daedeok University, said, “It is urgent to speed up production in the United States and not lose market share in North America right away.” He also advised, “If the subsidy is around 10 million won, we can consider expanding the company’s incentives, similar to the precedent that Kia paid for the tax benefit amount of the Sorento Hybrid, which had not previously been certified as an eco-friendly car.”