Under the Biden Administration’s IRA (Inflation Reduction Act), potential Hyundai Motor Group customers suffered a setback as they lost substantial Federal incentives amounting to upwards of $7,500 when purchasing a new Hyundai, Kia, or Genesis EV. The legislation impacting Hyundai, currently the second most popular EV brand in the United States, not only solidifies Tesla’s position as the U.S. leading EV brand, but also boosts sales prospects of General Motors and Ford, who are currently lagging behind Hyundai. With these developments, the landscape of the EV market is experiencing a noteworthy shift.
Hyundai, Kia, and Genesis’ problem however is not limited solely to the IRA. They are also confronted with challenges posed by newly proposed regulations put forth by the U.S. Environmental Protection Agency (EPA). These regulations have the potential to significantly impact the entire automotive industry, with far-reaching implications for Hyundai, Kia, and Genesis.
On July 9th Hyundai criticized the new U.S. EPA proposed regulations as being based on “overly optimistic assumptions” and “not sufficiently reflecting the major challenges facing the market in all respects.” Hyundai expressed concerns that the proposed regulations may not accurately consider current market conditions and the challenges that the industry is facing.
The EPA regulation proposes a reduction in carbon dioxide and fine dust emissions by new cars by 13% per annum from 2027 to 2032. According to the EPA proposal, a new emission limit per mile for 2032 will be 82g, which is 56% lower than the 2026 target. To meet the new EPA regulation 60% of a car manufacturers’ new car sales must be electric vehicles by 2030, and 67% electric by 2032.
The EPA proposal is a much tougher target than that previously set by Hyundai Motor Group, which to date has been one of the leading automotive manufacturers championing the cause for EV adoption. Hyundai’s own target for new electric vehicle sales in the United States for 2030 was 53%. If the EPA’s regulatory proposal is finalized, Hyundai’s electric vehicle sales volume must be increased by approximately 7 percentage points.
Considering Hyundai’s U.S. sales volume (801,800 units) in the first half of this year, the current portion of “eco-friendly cars” inclusive of electric cars and hybrid cars, (16.2%, 133,171 units) and plug-in electric cars (38,457 units, 4.69%) must be raised to a combined 60% in just seven years.
In response to the EPA’s proposal the American Automobile Innovation Alliance, which includes General Motors (GM), Toyota, Honda, Volkswagen, Ford, and the Stellantis Group, stated last month that the proposal “should be relaxed and reconsidered before helping strengthen China’s position.”
China, which was a weak player in the era of internal combustion engines, quickly switched to electric vehicles and became a major producer of EVs and batteries used in automobiles. Although China has been blocked by the IRA regulations, Chinese companies would be strengthened through the provision of electric car batteries. American car companies collaborating with Chinese battery companies puts additional pressure on Hyundai Motor Group. Due to the U.S.-China economic conflict codified under the IRA, Hyundai Motor Group must avoid Chinese companies in supplying batteries. However, U.S.-based Ford and GM are creating a joint ventures for manufacturing within the U.S. with China’s number one battery company, CATL.