Want a US tax credit? Build a US factory.
Following the passage of the Inflation Reduction Act, far fewer electric vehicles will qualify for the $7,500 federal tax credit. That's because the final version of the bill includes a clause that vehicles need to be assembled in North America. This instantly rules out South Korean-built EVs like the Kia EV6 and Hyundai Ioniq 5. But likely not for very long.
Hyundai Motor Group announced a $5.54 billion investment to build a new factory in Georgia, which will assemble its new EVs and produce batteries. The automaker originally planned to break ground in early 2023 with the goal of bringing the factory online by 2025, but according to a Reuters report, those plans may be pushed up to help reclaim those valuable tax credits.
The Yonhap News Agency cited an anonymous source, claiming Hyundai is considering breaking ground later this year so it can start production a year earlier in 2024. We have reached out to our contacts but this rumor is still unconfirmed by Hyundai. When the new factory in Georgia comes online, it should have a 300,000-unit annual capacity in the first year, though it's unclear which of Hyundai's vehicles will be built there.
We expect Hyundai to shift production of its highly-rated Ioniq 5 to Georgia for the local market to better help it compete against the Ford Mustang Mach-E, which still receives the tax credit. The upcoming Hyundai Ioniq 7 large SUV will likely be built there as well.
The Korean automaker also announced a $300 million upgrade to its existing Alabama factory to assemble the Santa Fe Hybrid (likely the plug-in hybrid too) and the upcoming Genesis Electrified GV70. Hyundai is among the automakers hit hardest by the Inflation Reduction Act, and has been vocal in its opposition to the new law.
"Hyundai has recently announced US investments of $10 billion including EV manufacturing in Alabama and Georgia. We are disappointed that the current legislation severely limits EV access and options for Americans and may dramatically slow the transition to sustainable mobility in this market," the company said in a public statement. "Hyundai and Genesis are fully supporting our dealers to assist consumers with accessing the currently available tax credit through appropriate processes and purchase agreements."
"International automakers are investing heavily in the United States to boost electric vehicle (EV) production - both to meet the demand of consumers and our shared climate goals. It will take time for automakers to transition supply chains and meet the sourcing requirements in the Senate-passed Inflation Reduction Act," Autos Drive America President and CEO Jennifer Safavian explained.
"It is disappointing that the Clean Vehicle Credit does not recognize the need to work with our allies as supply chains are being developed within the North American region. A straight-forward consumer incentive credit is the best tool to enable the transition towards a cleaner future, but the Inflation Reduction Act effectively leaves consumers behind," Safavian added.