[Newsmaker] Chung Euisun heads to US as inflation law puts Hyundai Motor EV strategy in peril

Hyundai Motor Group Executive Chair Chung Euisun made an emergency trip to the US on Tuesday to seek ways to deal with the latest US tax credit bill that has scrapped subsidies for foreign-made electric vehicles.

Amid looming concerns that the bill may jeopardize the carmaker’s EV strategy, Chung left for Washington, D.C., with Hyundai Motor President Gong Young-woon who is in charge of public relations, media outlets reported Wednesday, quoting unnamed sources.

They plan to meet high-ranking officials to voice their concerns over the axed subsidies for eco-friendly cars made in South Korea.

Last week, US President Joe Biden signed the $430 billion Inflation Reduction Act, which would allow up to $7,500 of tax credits for “Made in US” EVs only, putting the South Korean carmaker in jeopardy as it produces all of its EVs at home.

Hyundai’s $5.5 billion plan to build an EV manufacturing plant in the US state of Georgia is a key strategy to diversify its EV manufacturing bases. But under the initial plan, the plant is set to begin operations only in the first half of 2025 to produce some 300,000 vehicles a year. This leaves Hyundai with a 2 1/2-year gap before it can manufacture EVs in the US. 

With the enactment of the bill, the company is considering moving up the construction schedule to the end of this year from 2023. But this timeline still leaves Hyundai no option but to wait two full years without producing EVs on American soil, and can only sell vehicles made in Korea.

Market experts say Hyundai could mull lowering vehicle prices or offering promotional benefits equivalent to subsidies given to US-made EVs.

The carmaker could also push ahead with its luxury brand Genesis’ high-end EV lineups, as the new IRA law is only applicable to EVs below $55,000, they said.

The IRA bill, meanwhile, has also upset the Korean government, as it has been granting subsidies to EVs regardless of their origin.

In an apparent response to the bill, the Seoul government said it would review the current EV subsidy law and exclude foreign carmakers from receiving tax benefits. 

Working-level officials will also hold a meeting this week to seek measures such as applying different tax rates to carmakers based on their number of aftersales service centers, related workforce and the level of education for employees. 

Currently, Hyundai operates the largest number of aftersales service centers for EVs at 370, followed by Kia (279), Renault (192), GM Korea (100).

Among foreign carmakers, BMW operates the most at 68 aftersales service centers, followed by Mercedes-Benz (56), Volvo (32) and Audi (21). They all run a relatively small number of centers, despite their high sales volumes here. Tesla only runs nine, although it is third in the country in terms of accumulated EV sales.

By Kim Da-sol (ddd@heraldcorp.com)