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Foreign automakers love the new EV tax credit

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The auto industry is still processing the new and confusing electric vehicle credits signed by President Joe Biden as part of the Inflation Reduction Act of 2022. Foreign automakers, in particular, are trying to find a loophole that seems to affect the vast majority of disqualify their EV fleets, while others accelerate plans to build new plants in the US.

EVs built outside of North America are not eligible for the $7,500 tax credit. The law also includes provisions aimed at preventing the use of battery components or essential minerals sourced from China, which currently controls about three-quarters of the global battery market.

Two South Korean car manufacturers – Hyundai and its subsidiary Kia – are threatening legal action over the huge climate and energy bill. The two companies have the second largest share of the EV market in the US, but do not currently manufacture EVs in the US, Canada or Mexico.

According to the Financial timesChung Eui-sun, the billionaire scion of Hyundai’s founding family and the chairman of the Hyundai Group, flew to Washington, DC this week on an “urgent trade mission” to urge lawmakers to enforce the strict manufacturing and supply chain requirements of the reconsider the law. And South Korean Foreign Minister Park Jin leaned on US Secretary of State Antony Blinken this week in a call for some consideration for EVs made abroad, according to The Korea Times.

Hyundai plans to build a massive $5.5 billion auto plant near Savannah, Georgia, but likely won’t be produced in volume until 2025 — meaning the automaker won’t be eligible for funding until then. the tax credit.

Meanwhile, the European Union claims the law could violate World Trade Organization rules that exclude discrimination between trading partners. “We find it discriminatory that it discriminates against foreign producers against American producers,” said Miriam Garcia Ferrer, spokesman for the European Commission. according to CNBC. “Of course this would mean it would be incompatible with the WTO.”

Even domestic automakers are struggling to make sure their own EVs don’t lose their tax credit by using batteries with materials mostly sourced from China. “We are working overtime to locate our supply chains and ramp up production,” said Chris Smith, Ford’s Chief Government Affairs Officer, according to car news.

Other companies are speeding up their own plans to make EVs in the US. Earlier this week, Mercedes-Benz announced that it production kicked off of the 2023 EQS SUV at its plant in Tuscaloosa, Alabama, using batteries supplied by a battery plant in Bibb County. And Volkswagen has just started production of the 2023 ID.4 electric crossover at its plant in Chattanooga, Tennessee.

According to AlixPartners, the auto industry has invested more than $38 billion so far by 2026 to bring battery manufacturing to the US. Key projects include Panasonic’s $4 billion battery plant in Kansas, which is expected to become one of the largest lithium-ion battery plants in the world, and Hyundai’s battery plant in Georgia.

Of course, this was Senator Joe Manchin’s intention all along. The West Virginia Democrat, who was a key negotiator on the Inflation Reduction Act, has typically brushed aside foreign automakers’ concerns about the law’s restrictions.

“Narrate [automakers] to get aggressive and make sure we win in North America, we process in North America, and we cross out China,” Manchin told reporters earlier this month, according to Reuters. “I don’t believe we should build a mode of transport on the backs of foreign supply chains. I will not do it.”

But other Democrats have suggested there may be some wiggle room. Michigan Senator Debbie Stabenow told: Reuters that there are “talks” about the new rules. She also noted that the law includes billions of dollars in new loans and grants for auto and battery manufacturing in the US.

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