Hyundai Faces U.S. Backlash Over Electric Vehicle Subsidy Tactics

Is Hyundai’s Subsidy Disappearing?
Hyundai Exploited Exception Clause
Controversy Erupts in the U.S.

The issue with Hyundai Motor’s electric vehicle subsidy has been raised in the United States. Under the U.S. Inflation Reduction Act (IRA), there is a condition that subsidies shall be granted if a certain amount of minerals and battery parts are procured from the U.S. or a country with an FTA with the U.S.

There is also a rule that the final assembly must occur in North America. Therefore, Hyundai’s electric vehicles are excluded from the models that are eligible for a subsidy worth $7,500. However, there is one exception clause in the IRA. Upon Korea’s request, the act stipulates that subsidies are granted to leased and commercial vehicles created in 2022 without considering the conditions.

$7,500 Worth of Subsidies
Must Comply with IRA Regulations

Hyundai and its dealers have been promoting that leasing an electric vehicle that would not usually be eligible for a subsidy allows you to receive the subsidy benefits. The U.S. Congressional Research Service (CRS) recently pointed out that Hyundai is abusing the exception clause to grant electric vehicle subsidies.

They cited the example of Hyundai promoting that if you lease an Ioniq 5, you can receive a bonus of $7,500. Before the IRA took effect, the proportion of Hyundai electric vehicle leases was only 5%, but it has increased to 40% due to the exception clause related to leases.

Last Month’s Subsidy Revision
Model Y Subsidy Reduced by 62%

The Ioniq 5 is mainly produced in Korea and Indonesia. If the lease exception clause disappears, it will no longer be able to receive subsidies in the U.S. This will inevitably affect sales. This controversy arose after the electric vehicle subsidy plan was revised in Korea last month. According to the Ministry of Environment’s subsidy revision plan, subsidies for most imported electric vehicles have been reduced or frozen compared to the previous year. Tesla, the U.S. electric vehicle manufacturer with the largest market share in the domestic imported electric vehicle market, suffered the most.

The subsidy for Tesla’s best-selling Model Y has decreased by 62.1% to KRW 1.95 million (approx. $1460) this year from KRW 5.14 million (approx. $3840) last year. Some consumers have criticized this as a push for domestic electric vehicles. Still, the move to protect the domestic electric vehicle industry is more active in the U.S. With the upcoming presidential election, President Joe Biden and Republican candidate Donald Trump have prioritized industrial protection policies focused on national interests.

Regulations Are Gradually Being Strengthened
It May Not End Here

Of course, it is still just an opinion presented by the Congressional Research Service and does not have an official effect. Hyundai is also expected to meet the IRA regulatory conditions when it prepares to operate an electric vehicle factory in North America. However, it is difficult to predict how the situation will change as U.S. regulations are gradually strengthened to protect national interests and industries.