IRA Tax Credit Change Puts Hyundai Profits At Risk

Hyundai Motor Group is on track to have its best year ever since entering the U.S. marketplace in 1986,

Its Hyundai, Kia and Genesis brands are expected to capture nearly 11% of the U.S. new vehicle market. The Japanese automaker is also positioned to be among the top sellers of electric vehicles (EVs) this year, second only to Tesla through the third quarter.

The world’s fourth largest automaker may not be able to maintain this momentum if EV sales plummet because they no longer qualify for U.S. tax credits under the Biden Administration’s Inflation Reduction Act (IRA). EVs from Tesla, Ford Motor and General Motors still qualify for the credit. But Hyundai’s EVs are imported into the U.S., which makes the vehicles ineligible under the IRA.

In an interview with CNBC, Hyundai Motor Co. CEO Jaehoon “Jay” Chang called the loss of incentives “concerning” and referred to it as a “very challenging issue.” Even so, he stressed he believes Hyundai will continue its long-term growth in the U.S.

In the short term, he says IRA limits customers’ choices. But he told CNBC that the company has “a very solid plan” for the long term. Hyundai recently celebrated the groundbreaking of a new $5.5 billion electric vehicle and battery plant in Georgia.

Hyundai, Kia and other non-domestic automakers have expressed concerns over the IRA’s new EV tax credit regulations, which eliminated a tax credit of up to $7,500 for imported plug-in hybrid and electric vehicles.

The automaker is actively at work with U.S. public officials and South Korea to either change the regulation or to secure an exemption, Chang told CNBC. U.S. officials have confirmed ongoing talks, which included a meeting between U.S. Trade Representative Katherine Tai and South Korea’s Minister for Trade, Ahn Dukgeun.

Hyundai feels its investment in Georgia should be enough to eliminate or exempt them from IRA revisions. They also point out that the U.S. and South Korea already have a tariff free deal in place for vehicles. But vehicles built in Mexico and Canada, which have tariffs, still qualify for credits.

Steven Center, Kia America’s chief operating officer, has said the IRA changes are good for America, but that they “pulled the rug out from everybody.”