No Korea-made EVs are eligible for US tax credits

With the US government excluding electric vehicles equipped with Chinese batteries for tax credits starting this year, Korea-made electric cars sold in the US officially became ineligible for the hefty tax break.

According to the US Department of Energy on Monday, only 19 EV models are available for tax credits of up to $7,500 following the Inflation Reduction Act, a drop from last year’s 43 models.

Several US automakers’ electric car and plug-in hybrid models -- Chevrolet, Chrysler, Ford, Jeep, Lincoln, Rivian and Tesla -- are eligible to receive $3,750 or $7,500 in credits.

No Korean EV models were included in the list. Hyundai Motor Group’s premium brand Genesis GV70 used to be the only eligible model, but tax credits were scrapped as of April last year. The car is manufactured at the carmaker’s US plant in Alabama, but it uses batteries made in China.

The drop in the number of EV models that qualify for subsidies comes after the US introduced stringent regulations that do not allow vehicles to use battery components or source critical minerals from "foreign entities of concern" this year and in 2025.

Last month, the US Treasury listed almost all battery companies in China as FEOC, a movement aimed at weaning the US EV supply chain off China, according to industry sources.

The Treasury said, “Automakers are adjusting their supply chains to ensure buyers continue to be eligible for the new clean vehicle credit, partnering with allies and bringing jobs and investment back to the US.”

Hyundai Motor Group declined to comment on whether the company would be employing any countermeasures.

“Hyundai has anticipated that the US would not allow any EV tax breaks for its cars. It is expected to continue expanding its lease car business for electric cars which are exempt from the IRA,” said a source familiar with the matter on condition of anonymity.

Experts say the US’ recent subsidy requirements, however, have put some burden on the world’s third-largest automaker, especially as it is building a large-scale EV manufacturing plant in the US state of Georgia.

“Although Hyundai is investing trillions of won to meet the IRA guideline that mandates the US to be the final assembly location, it would not benefit its retail sales unless it uses batteries consisting of raw materials and minerals sourced from countries other than China,” said Kim Pil-su, a car engineering professor at Daelim University.

It will likely be challenging for the carmaker to boost sales of new cars in the US for some time, considering its heavy reliance on China-made batteries, Kim added.

From January to September, Hyundai and its smaller sibling Kia sold 213,270 eco-friendly cars in the US alone, a 61.6 percent jump from 2022. It surpassed last year’s annual sales of 182,627 units. Hyundai’s best-selling models were the Tucson Hybrid, the Ioniq 5 and the Santa Fe Hybrid. Kia’s top 3 best-selling models were the Sportage Hybrid, the Niro Hybrid and the Sorento Hybrid.