November 28, 2024

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Hyundai Motor Group’s Genesis GV70 (Hyundai Motor Group)

 All Hyundai and Kia cars are no longer eligible for tax credits for electric vehicles in the US amid increased protectionist sentiment there.

As the result of the Inflation Reduction Act that took effect in August last year, the US Treasury Department on Monday announced a total of 16 EV models that will qualify for a tax credit of up to $7,500. All of the cars are produced by US carmakers, including Tesla, GM, Ford and Stellantis.

The list includes: Tesla’s Model 3 Performance, Model Y and Model 3 Standard; GM Chevrolet’s Bolt, Silverado, Blazer and Equinox; Ford’s F-150 Lightning, Aviator Plug-in Hybrid and E-Transit; along with other three Ford models and two Jeep models.

Seven foreign carmakers -- mostly from Korea, Germany and Japan -- failed to make the list. The number of qualified carmakers has been almost cut in half compared to last year’s 13 brands.

In particular, Hyundai’s Genesis GV70, which was previously on the list, was taken off it because of the stricter battery manufacturing requirements under the IRA.

For EV purchases to qualify for $3,750 in tax credits, EVs are required to be assembled in North America and use more than 50 percent of battery components made locally. For another tax credit of $3,750, more than 40 percent of battery materials should be mined and refined in the US or countries with free-trade agreements with the US.

Genesis GV70 sedans are produced at Hyundai’s Alabama plant but use South Korean battery maker SK On’s battery cells made in China. The battery minerals’ mining and refining process also doesn’t meet the minimum requirements under the toughened IRA rules.

“GV70 models can qualify for a tax credit if purchases are made through lease programs,” a Hyundai Motor Group official said. “Genesis will carry on with a long-term plan to become an industry leader in EV production and sales in the US, while continuing efforts to meet the IRA rules.”

The carmaker’s strategic shift toward the leasing business comes as car leases and rentals are exempt from the IRA provisions.

According to industry sources, Hyundai is also speeding up the construction of its EV manufacturing plant in Georgia slated to be operational by 2025 as well as seeking ways to use a US-made battery for the GV70.

But experts say it seems unavoidable for the carmaker to see a drastic drop in US sales, with no immediate breakthrough in sight.

“Even if Hyundai rushes to complete the EV plant, it could become operational as early as late 2024,” said Kim Pil-su, a car engineering professor at Daelim University. “As for batteries, it would be extremely difficult for SK On to secure some 40 percent of minerals in the US within a short period of time.”

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