Analysis-New US rules on EV subsidies hit Hyundai, Kia dreams

By Heekyong Yang and Ben Klayman

SEOUL/DEROIT (Reuters) – After seizing the No. 2 spot in the U.S. electric vehicle market with stylish long-range models, Hyundai Motor and Kia are the automakers with the most to lose from new rules that end subsidies for EVs manufactured outside of North America.

Those two companies, which make the popular Ioniq 5 and EV6 models, sold more than 39,000 EVs in the United States between January and July – doubling last year’s sales and surpassing Ford Motor Co, Volkswagen AG and General Motors Co.

But the inflation-reduction law signed by U.S. President Joe Biden last month excludes Hyundai Motor Co and its subsidiary Kia Corp from federal tax credits because they do not yet make electric cars in North America, hitting their ambitions to EV in the short term at least, said a Hyundai official, parts suppliers, analysts and auto dealers.

Only about 20 electric vehicles qualify for subsidies under the new rules, including models from Ford and BMW, and starting next year, GM and Tesla Inc. The rules also set requirements for EV materials and parts from 2023.

Other foreign automakers, such as Toyota Motor Corp, which will also be affected by the law, have less at stake because they offer fewer models or have a smaller market share.

“All things being equal, if I buy this, I’ll get a $7,500 tax credit, and if I buy that, no, I love you Hyundai, but I’ll go with the one I can get a tax credit for,” said Andrew DiFeo, a Florida-based dealer. , which has seen some potential customers already abandon Hyundai EVs as a preference.

Graphic: US Battery Electric Vehicle Sales –

Hyundai Motor Group, which announced more than $10 billion in investments in the U.S. about three months ago, including a $5.5 billion electric vehicle plant in Georgia, is not satisfied.

Biden had thanked Hyundai for the investment in May: “Thank you again for choosing the United States. We will not let you down.”

An official at a major Hyundai supplier who spoke to senior company officials told Reuters the automaker was caught off guard by the law.

“So much so that he didn’t let us down,” said the person, who spoke on condition of anonymity. “It’s a big mess.”

South Korean officials met with US counterparts this week to express concerns, and the Financial Times reported that Hyundai Motor Group Chairman Euisun Chung went to Washington last week as well.

A senior government official said on Tuesday Seoul had asked Washington to delay the new rules until the completion of the Georgia plant in 2025. South Korea said the new law could violate treaties such as the US-South Korea free trade agreement.

“The US EV plant’s plan was to get subsidies in light of the growing EV market in the United States … the new law affects us negatively and directly,” said a company official who declined to be identified because they were not authorized to speak. in the media.


While the auto group is considering bringing forward the start of factory construction as early as this year, analysts still expect a drop in sales due to a loss of momentum.

Analysts said it was still too early to quantify how much the new rules would cost companies in revenue and profits, but several said they would likely use incentives to attract American buyers, a move that could increase costs.

After Biden signed the law on Aug. 16, shares of Hyundai and Kia each fell about 4 percent. They have since recovered.

“We are internally considering various ways to address the Act,” Hyundai Motor Group said in a statement to Reuters.

While Hyundai and Kia’s US EV sales came in at just over a tenth of Tesla’s volumes and about 9% of the US market share, they suggested the companies were on track to cement their position as a leading EV player in country.

Hyundai will launch its first EV sedan Ioniq 6 in the United States early next year, a car that analysts expected could compete with Tesla in the US market because of its price.

Kia has not confirmed plans to launch the EV9 in the US, a much larger SUV than the EV6, although analysts expected it to be a hit with American consumers who prefer big cars. Seoul-based Daol Investment & Securities analyst Yoo Ji-woong said Kia will likely consider building the EV9 in the United States to receive subsidies.

Yoo believes all automakers will ultimately benefit.

“It may take a few years, but eventually the law will help make electric cars more affordable.”

(Reporting by Heekyong Yang in Seoul and Ben Klayman in Detroit; Additional reporting by Aishwarya Nair in Bengaluru; Editing by Sayantani Ghosh and Kim Coghill)

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