September 28, 2022 13:21
A silver lining is on the horizon for Korean electric car makers after a new U.S. law stopped state subsidies for EVs made outside North America, threatening their position in the American market.
U.S. Vice President Kamala Harris on Tuesday signaled a grace period for Korean EV makers before they are ready to make their cars in America while the U.S. Inflation Reduction Act is being implemented.
Harris sat down with Prime Minister Han Duck-soo in Tokyo before attending the state funeral of former Japanese Prime Minister Shinzo Abe. She said Seoul and Washington will continue "close consultations" to address Korea's concerns over the act, which excludes electric vehicles assembled outside North America from U.S. tax breaks.
She added she understands Korea's concerns and hinted at a grace period until EV assembly plants in the U.S. are complete. Hyundai begins construction of an EV plant in the state of Georgia late this year, aiming to finish it by 2025.
Korean carmakers believe their products should be given equal treatment as U.S. goods under the Korea-U.S. Free Trade Agreement, especially since they have already pledged massive investments in the U.S.
But no immediate change to the act is likely ahead of U.S. mid-term elections slated for November, which are likely to be fought on super-heated patriotism. Korean companies instead hope for a grace period until they begin production there.
Hyundai has pledged to invest a whopping US$10.5 billion, including $5.5 billion for the Georgia plant, plus new projects such as urban air mobility, robotics and automated driving. The IRA, which puts it at a distinct disadvantage in the U.S. against local carmakers, felt like a slap in the face.
Harris flies to Seoul on Thursday, where she faces further discussions of the IRA. She will meet President Yoon Suk-yeol and visit the demilitarized zone.
She said the U.S.-Korea "alliance remains the linchpin of peace, stability, and prosperity in the Indo-Pacific and around the world." Han said her visit to the DMZ will be "very symbolic."
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