South Korea believes the US may reduce the tax credits in President Joe Biden’s landmark clean energy law, which encourages automakers to manufacture electric cars in the US, should Republicans come to power.
“We don’t rule out the possibility that the US may slash the amount of tax credits and benefits in the Inflation Reduction Act if Republicans win the next presidential election,” Korea’s trade minister Dukgeun Ahn said in Seoul on Thursday during a briefing with reporters. “Republicans opposed the IRA before the law was enacted so if they can’t abolish it, they may put some restrictions on its execution.”
Companies in South Korea have lobbied against the US Inflation Reduction Act, which provides for tax credits of up to $7,500 for some electric vehicles if they’re produced in North America and also seeks to reduce reliance upon China in the EV supply chain. Biden has a target that half of new passenger vehicles sold in the US run on electricity by 2030.
Hyundai Motor Co., for example, doesn’t currently have a factory in the US to make electric cars while Korean battery makers like LG Energy Solution Ltd. and Samsung SDI Co. rely heavily on China to process the minerals used in EV batteries.
Hyundai is planning to spend as much as $5 billion with battery partner SK On Co. to build a cell plant in Georgia as well as construct its own electric-car plant in the US in order to satisfy the requirement for tax credits under the law. LG Energy Solution and Samsung SDI also plan to build multiple plants in the US.
Goldman Sachs Group Inc. has estimated the IRA will cost roughly $1.2 trillion, three times more than the official government forecast. Shares in Hyundai dipped 0.5% on Friday, trimming gains for the year to 36%.
In April, US Speaker Kevin McCarthy proposed a bill that would raise the US debt limit that also included repealing new energy tax credits in the IRA and restoring existing ones to levels prior to the passage of Biden’s historic climate legislation. The legislation will “end the green giveaways to companies that distort the market and waste taxpayers’ money,” McCarthy said at the time.
Read More: Billions in Climate Tax Credits Face Repeal in GOP Debt Plan
Dukguen also said Korea’s trade ministry is working with the US regarding offering more favorable details in the IRA, such as including Indonesia as a mineral partner with the US, like the US-Japan partnership on battery minerals. However he added that including Indonesia as a trade partner for the US won’t be easy due to ESG concerns in Indonesia, such as human rights violations.
South Korea is also “very keen” on building cooperation with the US around cutting-edge technologies like AI and next-generation semiconductors, he said.
--With assistance from Gabrielle Coppola.
(Updates with Hyundai share price move.)
