Will Hyundai or Kia EVs Qualify for the Electric Vehicle Tax Credit?

Ever since President Biden signed the Inflation Reduction Act, which unveiled a revamped electric vehicle tax credit, some major industry manufacturers have expressed concern over new sourcing and assembly requirements in the massive climate, energy, healthcare, and tax law.

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.

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, recently met with President Biden to discuss the impact of the new EV manufacturing and sourcing requirements.

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Vice President Kamala Harris also met with South Korea’s prime minister, Han Duck-soo, in September. Both sides have since expressed a desire to work together throughout the implementation of the Inflation Reduction Acts’ electric vehicle tax credit provisions.

The Affordable Electric Vehicles for America Act

Meanwhile, U.S. Sen. Reverend Raphael Warnock (D-Ga.), who is in a closely watched 2022 midterm elections race against former NFL running back, Herschel Walker, has encouraged the Biden administration to consider flexibility in the implementation of EV tax credit reforms.

Additionally, the Georgia senator recently 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.

Essentially, if passed, the battery sourcing requirement wouldn’t go into effect until 2025, and the final assembly requirement would be delayed until 2026. 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.

Why did Sen. Warnock introduce the Affordable Electric Vehicles for America Act? Well, the stakes in Georgia are high, in part because of the 2022 midterm elections which could determine the balance of power in the U.S. Senate. But also: Hyundai is set to begin construction next year on an EV auto manufacturing plant in Georgia. The multi-billion-dollar investment, which was announced in May, 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, since Congress is out of session, it’s hard to say whether Warnock’s bill will gain any traction. If the proposed legislation falls flat, 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.

As a result, major EV industry automakers whose electric vehicles aren’t currently primarily sourced in North America, will likely work to shift 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, you will likely have to wait and see if anything changes with the sourcing and manufacturing of Kia or Hyundai EVs. In the meantime, 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 Credits Are Changing: What’s Ahead.