As the race to complete electrification speeds up, U.S. authorities have become increasingly uncomfortable with America’s reliance on foreign nations in the nascent EV sector. Although American company Tesla was and still is the most dominant entity in the global EV market, a significant percentage of the electric cars on American roads are from overseas carmakers. Furthermore, the country’s electric vehicle battery production capacity pales in comparison to Asian countries such as China.
As such, the Biden administration recently passed a law that would, among other things, bolster America’s budding electric vehicle industry by providing up to $7,500 in tax credits for EV purchases. However, the catch was that these EVs had to be American made to qualify for the tax credits. South Korea, which is home to automakers such as Kia and Hyundai, was not happy with this rule, with a senior official calling the move a “betrayal” of the two countries’ long-standing cooperation.
As South Korean President Yoon Suk-yeol’s first official visit to the United States drew closer, it seemed the Asian country’s opposition to the new EV tax credit rules just may overshadow the visit. After attending Queen Elizabeth’s funeral, President Yoon headed to New York on Monday for the UN General Assembly.
He is expected to hold a summit with President Joe Biden soon to discuss growing nuclear weapon threats from North Korea as well as South Korean concerns about the recently passed Inflation Reduction Act and its potential impact on the country’s automotive sector. The law will essentially disqualify vehicles made outside the country from EV tax incentives, meaning vehicles produced by South Korean companies Kia Corp and Hyundai Motor won’t be eligible for electric vehicle subsidies.
This could be a major blow for the companies because most electric vehicles are generally too expensive for the average consumer. In fact, a significant percentage of American EV sales were made possible by subsidies that made electric cars more affordable. Consequently, disqualifying foreign companies from accessing these subsidies will more than likely have a negative effect on their sales and bottom lines.
South Korean officials see the rule as a betrayal of the Asian country, especially after its companies committed to investing and building electric vehicle factories in the U.S. They requested that the Biden administration postpone the deployment of the new rules until Hyundai finishes construction of a factory in Georgia in 2025. Biden will most likely have to respond to this request during the meeting.
U.S.-based startups such as Lordstown Motor Corp. (NASDAQ: RIDE) will definitely have no complaints about the incentives intended to give them a leg up in the nascent EV industry.
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