US Denies EV Tax Credits to US Consumers Considering Buying Korean Cars

It’s official, all Hyundai and Kia cars are no longer eligible for Federal tax credits available to electric vehicles in the US. The Biden Administration’s Inflation Reduction Act which took effect in August last year put the Korean manufacturer’s destiny in jeopardy. On Monday the US Treasury Department announced a total of 16 EVs that will qualify for the Federal tax credit of up to $7,500. All of the eligible cars are produced by US carmakers, including Tesla, GM, Ford and Stellantis.

The list of eligible EVs includes: Tesla’s Model 3 Performance, Model Y and Model 3 Standard; GM Chevrolet’s Bolt, Silverado, Blazer and Equinox; Ford’s F-150 Lightning, Aviator Plug-in Hybrid and E-Transit; along with other three Ford models and two Jeep models. Seven foreign carmakers — mostly from Korea, Germany and Japan — failed to make the list. The number of qualified carmakers has been cut nearly in half compared to last year.

Hyundai’s Genesis GV70, which was previously on the list, was taken off it because of the stricter battery manufacturing requirements under the IRA. For EV purchases to qualify for $3,750 in tax credits, EVs are required to be assembled in North America and use more than 50 percent of battery components made locally. For another tax credit of $3,750, more than 40 percent of battery materials need to be mined and refined in the US or countries with US free-trade agreements. Genesis GV70 sedans are produced at Hyundai’s Alabama plant but use South Korean battery manufacturer SK On’s battery cells which are made in China. The battery minerals’ mining and refining process also doesn’t meet the minimum requirements under the toughened IRA rules.

As a result, Korean car manufacturer dealerships offering EVs are encouraging costumers to consider leasing instead of buying as leases (or rentals) are currently exempt from the IRA. Hyundai is also speeding up the construction of its EV manufacturing plant in Georgia slated to be operational by 2025 as well as seeking ways to use a US-made battery for the GV70. However even if Hyundai expedited the construction of the Georgia plant, it is unlikely SK On would be able to achieve 40% of the minerals sourced locally within the United States as quickly.