# New U.S. rules on EV subsidies slam Hyundai, Kia’s dreams Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-09-02 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Hyundai and Kia Face Setback in U.S. EV Market Meta Description: Discover how Hyundai and Kia, makers of popular electric vehicles like the Ioniq 5 and EV6, are impacted by new U.S. tax credit regulations, putting their EV URL: https://financedigest.com/new-u-s-rules-on-ev-subsidies-slam-hyundai-kias-dreamshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-09-01t045012z1lynxmpei8019trtroptp4hyundai-motor-electric-usa-1736815305948-compressed.jpg) By Heekyong Yang and Ben Klayman SEOUL/DETROIT (Reuters) -After grabbing the No. 2 spot in the U.S. [electric vehicle](https://www.financedigest.com/tax-credits-for-eu-electric-vehicles-to-dominate-mondays-trade-talks-with-u-s.html "Tax credits for EU electric vehicles to dominate Monday’s trade talks with U.S") market with stylish, long-range models, Hyundai Motor and Kia are the automakers with the most to lose from new rules that halt subsidies for EVs made outside North America. These two companies, which make the popular Ioniq 5 and EV6 models, sold more than 39,000 EVs in the United States between January and July – doubling last year’s [sales and blowing past Ford Motor](https://www.financedigest.com/indias-tata-motors-jumps-to-a-7-month-high-on-strong-q4-jlr-sales.html "India’s Tata Motors jumps to a 7-month high on strong Q4 JLR sales") Co, Volkswagen AG and General Motors Co. But the [Inflation Reduction Act](https://www.financedigest.com/factbox-governments-act-to-ease-inflation-pain.html "Factbox-Governments act to ease inflation pain") signed into law by U.S. President Joe Biden last month excludes Hyundai Motor Co and its affiliate Kia Corp from federal [tax credits](https://www.financedigest.com/eu-us-working-on-deal-to-make-ev-minerals-eligible-for-tax-credits-eu-official.html "EU, US working on deal to make EV minerals eligible for tax credits -EU official") because they don’t yet make EVs in North America, knocking their EV ambitions in the short term at least, a Hyundai official, parts suppliers, analysts and car dealers said. Only about 20 EVs qualify for subsidies under the new rules, among them models from Ford and BMW, and starting [next year](https://www.financedigest.com/novartis-to-spin-off-generics-business-sandoz-next-year.html "Novartis to spin off generics business Sandoz next year"), GM and Tesla Inc. The rules also specify requirements for EV battery materials and parts sourcing from 2023. Other foreign carmakers such as Toyota Motor Corp which will also be affected by the law have less at [stake because they offer](https://www.financedigest.com/mfe-offers-to-buy-1-05-stake-in-mediaset-espana-from-vivendi-ahead-of-delisting.html "MFE offers to buy 1.05% stake in Mediaset Espana from Vivendi ahead of delisting") fewer models or command less market share. If all [things are equal and if I buy](https://www.financedigest.com/4-things-to-consider-before-buying-your-dream-car.html "4 Things To Consider Before Buying Your Dream Car") this one I get a $7,500 tax credit and if I buy that one I don’t, I love you Hyundai but I’m going to go with the one where I can get a tax credit,” said Andrew DiFeo, a Florida-based dealer who has seen a few potential customers already drop Hyundai EVs as a preference. Hyundai Motor Group, which announced over $10 billion in U.S. investments some three months back including a $5.5 [billion EV plant](https://www.financedigest.com/intel-wants-5-billion-more-in-german-subsidies-for-chip-plant-bloomberg-news.html "Intel wants billion more in German subsidies for chip plant – Bloomberg News") in Georgia, is not pleased. Biden had thanked Hyundai for the investments in May: “Thank you again for choosing the United States. We will not let you down.” An official at a large Hyundai supplier who has spoken to senior officials at the company told Reuters that the automaker was caught off guard by the law. “So much for not letting us down,” said the person, who spoke on condition of anonymity. “It’s a big mess.” South Korean officials met U.S. counterparts this week to express concerns, and the Financial Times reported that Hyundai [Motor Group Chairman Euisun Chung headed](https://www.financedigest.com/uk-motor-and-home-insurers-headed-for-heavy-losses-ey-warns.html "UK motor and home insurers headed for heavy losses, EY warns") to Washington too last week. A senior [government official said on Tuesday Seoul has asked Washington to postpone the new rules](https://www.financedigest.com/italys-rightist-government-tightens-rules-for-migrant-rescues.html "Italy’s rightist government tightens rules for migrant rescues") until the completion of the Georgia factory in 2025. [South Korea](https://www.financedigest.com/south-korea-has-not-supplied-lethal-weapons-to-ukraine-president-says.html "South Korea has not supplied lethal weapons to Ukraine, president says") has said the new law may violate treaties such as the U.S.-South Korea free [trade agreement](https://www.financedigest.com/santander-signs-a-new-agreement-with-yes-bank-to-boost-uk-india-trade-and-local-business-networking-opportunities.html "Santander Signs A New Agreement With Yes Bank To Boost Uk-India Trade And Local Business Networking Opportunities"). “Our U.S. EV factory plan was to get subsidies in light of the growing EV market in the United States … the new law negatively and directly [affects us,” said a company](https://www.financedigest.com/factbox-companies-potentially-affected-by-italys-election.html "Factbox: Companies potentially affected by Italy’s election") official who declined to be identified because they are not authorised to speak to media. AMERICAN MADE While the auto group is considering bringing forward the construction start of the factory to as early as this year, analysts still expect a [drop in sales](https://www.financedigest.com/switzerlands-clariant-sees-slight-sales-drop-in-2023.html "Switzerland’s Clariant sees slight sales drop in 2023") due to a loss of momentum. Analysts said it was too early yet to quantify how much the new rules will [cost the companies in revenue and profit](https://www.financedigest.com/suedzucker-quarterly-profits-surge-73-5-despite-cost-rise.html "Suedzucker quarterly profits surge 73.5% despite cost rise"), but several said they would likely use incentives to attract American shoppers, a move that could push up costs. After [Biden signed](https://www.financedigest.com/biden-signs-bill-to-boost-u-s-chips-compete-with-china.html "Biden signs bill to boost U.S. chips, compete with China") the Act on Aug. 16, shares in Hyundai and Kia fell some 4% each. They have since recovered. We are [internally considering diverse ways](https://www.financedigest.com/is-regtechs-rise-one-way-tackle-the-international-regulatory-game-of-risk.html "Is Regtech’s rise one way tackle the international regulatory game of Risk?") to cope with the Act,” Hyundai Motor Group said in a statement to Reuters. While Hyundai and Kia’s American EV sales added up to just over a tenth of Tesla’s volumes and roughly 9% of the U.S. market share, they suggested that the companies were on their [way to cement their position as a top](https://www.financedigest.com/5-top-ways-to-buy-ethereum.html "5 Top Ways to Buy Ethereum") EV player in the country. Hyundai will [launch it first EV sedan Ioniq 6 early next](https://www.financedigest.com/fime-launches-the-next-generationof-its-emv-level-3-test-platform.html "FIME launches the next generationof its EMV Level 3 test platform") year in the United States, a car that analysts had expected could compete with Tesla in the U.S. [market because of its pricing](https://www.financedigest.com/west-drayton-proves-popular-alternative-with-those-priced-out-of-london-market.html "West Drayton Proves Popular Alternative With Those Priced Out Of London Market"). Kia has not confirmed plans for a U.S. launch of the EV9, an SUV much bigger than the EV6, though analysts expected it to be a [hit with American consumers](https://www.financedigest.com/uk-consumer-mood-hits-one-year-high-but-financial-gloom-persists.html "UK consumer mood hits one-year high, but financial gloom persists") who prefer big cars. Seoul-based Daol [Investment & Securities](https://www.financedigest.com/ils-investment-returns-continue-to-outperform-according-to-aon-insurance-linked-securities-report.html "ILS investment returns continue to outperform, according to Aon insurance-linked securities report") analyst Yoo Ji-woong said Kia would likely consider making the EV9 in the United States to get subsidies. Yoo is sanguine that all automakers will ultimately benefit. It may take a few years, but eventually the [law will help make electric cars](https://www.financedigest.com/eu-approves-law-to-end-sales-of-new-co2-emitting-cars-by-2035.html "EU approves law to end sales of new CO2-emitting cars by 2035") more affordable. (Reporting by Heekyong Yang in Seoul and Ben Klayman in Detroit; Additional reporting by Aishwarya Nair in Bengaluru; Editing by Sayantani Ghosh and Kim Coghill) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---