Kia is among some major industry manufacturers that have expressed concern over new sourcing and assembly requirements in the Inflation Reduction Act (IRA). Signed by President Biden last year, the IRA is a massive climate, energy, healthcare, and tax law that also unveiled a revamped electric vehicle tax credit.
To spur domestic EV production,” the Inflation Reduction Act requires that final assembly of so called “clean vehicles” occur in North America, for those EVs to qualify for the EV tax credit. The final assembly requirement became effective August 16, 2022. There is a similar requirement in the Inflation Reduction Act, that minerals and other key components (i.e., battery components), which are used to manufacture electric vehicles, also be primarily sourced in North America—by 2026.
Kia and Hyundai EV Assembly
South Korea has been vocal in its belief that the new EV tax credit requirements mean that many EVs, including those made by Hyundai and Kia, won’t qualify for the electric vehicle tax credit. To address those concerns, South Korean President, Yoon Suk-yeol, has met with President Biden to discuss the impact of the new EV manufacturing and sourcing requirements.
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In September 2022, Vice President Kamala Harris also met with South Korea’s prime minister, Han Duck-soo. Both sides expressed a desire to work together throughout the implementation of the Inflation Reduction Acts’ electric vehicle tax credit provisions, which is ongoing at Treasury and the IRS.
The Affordable Electric Vehicles for America Act
Meanwhile, at the end of 2022, U.S. Sen. Reverend Raphael Warnock (D-Ga.) encouraged the Biden administration to consider flexibility in the implementation of EV tax credit reforms. The Georgia senator proposed the Affordable Electric Vehicles for America Act, which would create a phase-in-period for the Inflation Reduction Act’s electric vehicle sourcing and manufacturing requirements.
The idea is that if automakers have more time to meet the new EV requirements, more buyers who purchase electric vehicles, will qualify for the $7,500 EV tax credit.
Hyundai is set to begin construction this year on an EV auto manufacturing plant in Georgia. The multi-billion-dollar investment, which was announced in May 2022, is significant and could be directly impacted by the new electric vehicle tax credit requirements in the Inflation Reduction Act.
In proposing the Affordable Electric Vehicles for America Act, Warnock said that in addition to needing more time to meet onshoring requirements, Georgia automakers need more time to bring planned domestic EV facilities online. The Hyundai facility is scheduled to open in 2025 in Bryan County, GA.
Vehicles That Qualify for the Electric Vehicle Tax Credit
At this time, what, if anything will ever happen with Warnock’s bill. In the meantime, the Inflation Reduction Act’s requirements for sourcing and manufacturing electric vehicles in North America will be implemented in accordance with the law as enacted. The IRS expects to release that guidance in March.
Meanwhile, major EV industry automakers whose electric vehicles aren’t currently primarily sourced in North America, are likely to shift some manufacturing to the U.S., so that their vehicles might qualify for the new EV tax credit.
So, what can you do? Well, if you’re in the market for popular Kia Niro, Kia EV6, or Hyundai IONIQ5 electric vehicles for example, see if anything changes with the sourcing and manufacturing of Kia or Hyundai EVs. Also, keep an eye on the Department of Energy’s current listing of which vehicles are eligible for the new EV tax credit.
And, for more detailed information about the new EV tax credit and the Inflation Reduction Act, see EV Tax Credit Explained: What’s Changed and What's Ahead.
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