South Korea will seek cooperation with the European Union over the U.S. Inflation Reduction Act that excludes electric vehicles (EVs) assembled outside of North America from tax credits in the United States, the country’s industry ministry said on Thursday.
U.S. President Joe Biden signed into law on Aug. 16 a $430 billion bill which, among other measures, ends tax credits for about 70% of the 72 EV models that were previously eligible.
As a result, EVs sold by Hyundai Motor Co (005380.KS), Kia Corp (000270.KS), Germany’s Porsche Automobil Holding SE (PSHG_p.DE) and others are no longer eligible for the tax credits.
“South Korea and Germany, which export EVs to the United States, share similar concerns about the U.S. Inflation Reduction Act, and we plan to seek cooperative plans such as having discussions with Germany and the European Union in the near future,” the industry ministry said in a statement.
The new rules that go into effect next year also require at least 40% of the monetary value of critical minerals for batteries be from the United States or an American free-trade partner. The proportion will gradually rise to 80% in 2027.
The industry ministry added that the country’s auto industry group, the Korea Automobile Manufacturers Association (KAMA), is also pursuing a plan to issue a joint statement in September over the matter with the European Automobile Manufacturers Association.
KAMA said on Thursday that the U.S. Inflation Reduction Act could impact export of 100,000 EVs annually, as EVs assembled in South Korea will not be eligible for $7,500 EV tax subsidies in the United States.
KAMA added that discrimination against South Korea-made EVs over EV tax benefits violates the spirit of an economic and security alliance between South Korea and the United States, after Hyundai Motor and Samsung Electronics Co Ltd (005930.KS) announced U.S. investment plans totalling over $27 billion.
In response to the new law, Hyundai Motor could bring forward the start-date for construction of its EV and battery plant in the U.S. state of Georgia to as early as this year.
South Korea will review whether to file a complaint at the World Trade Organization over the U.S. Inflation Reduction Act, citing concern that the law could violate WTO rules and a bilateral free trade deal between South Korea and the United States, Industry Minister Lee Chang-yang told a parliamentary session on Monday.