Hyundai Set to Launch $5.5 Billion US EV Plant as Inflation Reduction Act Dims Sales Outlook

Hyundai's is set to break ground at a time when South Korea and the EU are angry with the US over the country's electric vehicle tax policy.

By Reuters | Updated: 25 October 2022 18:48 IST

Hyundai Set to Launch $5.5 Billion US EV Plant as Inflation Reduction Act Dims Sales Outlook

Photo Credit: Reuters

Only about 20 EVs qualify for subsidies under the new rules introduced in August

Highlights

Hyundai has been affected by the recently passed Inflation Reduction Act
Inflation Reduction Act was signed by US President Joe Biden in August
Hyundai's US plant will have an annual capacity of 300,000 units

Hyundai will break ground on a $5.54 billion (roughly Rs. 45,500 crore) electric vehicle (EV) and battery plant in the US on Tuesday, as South Korea's biggest automaker grapples with an uncertain outlook for its EV sales in its top market. Hyundai plans to begin commercial production in the first half of 2025 in the massive plant in Bryan County, west of Savannah, which will have an annual capacity of 300,000 units.

Georgia Governor Brian Kemp, a Republican, and its two US senators, Jon Ossoff and Raphael Warnock, both Democrats, plan to attend the event. Kemp and Warnock are up for re-election next month.

Hyundai's groundbreaking comes amid anger from Korea and the European Union over US electric vehicle tax policy.

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The Inflation Reduction Act signed by US President Joe Biden in August requires EVs to be assembled in North America in order to qualify for US tax credits. Hyundai and its affiliate Kia as well as major European automakers were excluded from the EV subsidies as they do not yet make the vehicles there.

The law made about 70 percent of EVs immediately ineligible for the tax credits of up to $7,500 (roughly Rs. 6.2 lakh) per vehicle.

Sales of the Hyundai Ioniq 5 crossover SUV in the US slumped around 14 percent in September from the previous month, hit by the new US law.

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Concern over Hyundai's US EV sales under the new regulations was cited by analysts when the company announced quarterly results on Monday and also contributed to its shares falling.

Biden has expressed a willingness to continue talks with South Korea over recent US legislation that denies subsidies to most foreign EV makers, South Korea said earlier this month.

Biden gave the assurance in a letter to South Korean President Yoon Suk-yeol, who had asked the US president last month for help to allay Seoul's concerns that the new US rules would hurt South Korea's automakers.

As a result of the August law, only about 20 EVs qualify for subsidies under the new rules, among them models from Ford and BMW.

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