November 25, 2024

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Mercedes-Benz’s electric vehicle charging station in Seoul, Korea on Dec. 8, 2023 (Newsis)

Hyundai Motor Group and Korean battery manufacturers called for leniency in the US electric vehicle tax credit rules blocking battery sourcing from foreign adversaries including China, according to the Federal Register.

In public comments submitted to the open-access website for US federal government documents on Thursday, Hyundai said, “It is unlikely that other countries will be able to replace China in the short term,” underscoring the global market’s dependence on the No. 1 producer of battery minerals.

As of 2022, China -- deemed a “Foreign Entity of Concern” -- processed and produced 100 percent of spherical graphite and 69 percent of synthetic graphite in the world, according to the company.

Electric vehicles eligible for the full $7,500 tax break in the US should not contain any battery components manufactured or assembled by an FEOC from this year. Beginning in 2025, they should not contain any critical minerals extracted, processed or recycled from such countries.

Hyundai Motor urged the US government to temporarily introduce a list of key minerals such as graphite for batteries and battery components that can be sourced regardless of their origin.

It also requested adopting a “de minimis” rule -- voiding the FEOC regulation if a certain type of critical mineral takes up less than 10 percent of the total value of battery minerals -- and the Treasury to announce a list of battery materials for which is is impossible to trace their origin.

Hyundai noted it needs more time to adjust its battery supply chain, adding it is doubtful for the company to follow the policy target set by the US government, despite its all-out efforts, if it mandates immediate change regardless of the current state of the industry.

Like Hyundai Motor, LG Energy Solution suggested low-value battery minerals such as cobalt, zirconium, tungsten, yttrium, titanium, graphite and fluorite be exempted from the FEOC restriction. It also said it is hard to trace back the origin of such battery minerals because the suppliers tend to withhold such information, citing confidentiality.

SK On called for postponing the FEOC application on critical minerals to 2027, stressing that not only would it take at least three to four years to set up a supply chain that can replace China’s graphite, but even then it would be challenging to cater to the demand from North America.

With Washington’s more stringent regulations to deter Beijing’s presence in the global EV supply chain starting this year, the number of electric cars eligible for US tax credits dropped from 43, from 19 in December 2023. No Korean EV models are now included.

Experts say chances are slim for the US to give leeway on the rules, especially with the upcoming presidential election in November.

“The government might say it would ‘consider’ making adjustments. But such policy changes which can be sensitive issues for the voters tend to be made after the election,” said Lee Ho-geun, a chemistry professor at Daeduk University. “Korean companies should make additional efforts to reduce dependence on China for the time being.”

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