November 18, 2024

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Kia’s all-electric sport utility vehicle EV9 (Kia)

Hyundai Motor Group affiliate Kia is reportedly scaling back US production of its ambitious EV9, a large all-electric sport utility vehicle, due to stricter Inflation Reduction Act regulations.

According to industry sources Sunday, Hyundai Motor Group’s manufacturing facility in Georgia, which began operation last month, produced 21 EV9s in the third quarter and only one was sold in the US.

Given that the EV9’s monthly sales volume is approximately 1,800 units, the US production constraints are impacting the sales of the family SUV that made its debut in May this year. Most EV9s sold in the US are imported from Kia’s auto plant in Korea.

Kia’s hesitation to boost EV9 sales comes after more stringent Inflation Reduction Act rules, which now ban batteries produced or assembled by a Foreign Entity of Concern. From 2025, EVs should also avoid battery materials sourced from FEOC countries to receive the full $7,500 subsidy.

The battery-powered SUV is equipped with battery cells from Korean supplier SK On, manufactured in China, a country designated as a FEOC. As a result, the EV9 only qualifies for half of the IRA tax credit.

“The EV9 is ineligible to benefit from the full IRA benefits due to the battery issue, along with other factors, including price,” said a Kia official. EV9 prices start at $56,395, with the GT lineup estimated to cost around $80,000. The IRA provides incentives for SUVs and pickup trucks priced under $80,000.

To accelerate IRA-compliant electric car sales, Hyundai Motor Group and SK On are constructing a battery cell manufacturing plant in Georgia. Projected to have 35 gigawatts-hour annual capacity -- sufficient for over 500,000 EVs -- the facility is strategically located 460 kilometers and 189 kilometers from Hyundai Motor Company’s and Kia’s Georgia plants, respectively. Hyundai Motor Group is also setting up a joint venture for a 30 GWh battery with LG Energy Solution in Georgia.

Despite these production adjustments, reports suggest President-elect Donald Trump’s transition team is considering scrapping the EV tax credit.

“It might be challenging for the Trump administration to repeal the IRA completely. However, reducing the EV subsidy could effectively end benefits for foreign automakers with US facilities. In such a scenario, Kia may need to offer additional incentives to its local dealers to boost sales,” commented Kim Pil-su, a car engineering professor at Daelim University.

By Byun Hye-jin  (hyejin2@heraldcorp.com)