The so-called inflation Reduction Act, which came into force in the United States this year, provides for the provision of tax deductions to buyers of electric vehicles. However, foreign-built cars mostly do not fall under the terms of this benefit. Therefore, Hyundai, which has high hopes for the US market, was forced to decide to build an enterprise in Georgia.
It is expected that from the first half of 2025, 300 thousand electric vehicles will be assembled per year, and the enterprise will be located west of the city of Savannah in Georgia. Since the Korean SK Innovation in this state has an enterprise for the production of traction batteries, it cannot be ruled out that in the future the “countrymen” will cooperate in the United States.
Hyundai expects to invest 5 5.54 billion in the construction of a car assembly plant in Georgia, and traction batteries will also be produced here. The ceremony dedicated to the launch of this project is going to be attended not only by the governor of Georgia, but also by two senators from the US Democratic Party. In its current interpretation, the inflation reduction act deprives about 70% of electric vehicles offered in the United States of the right to provide a tax deduction to buyers in the amount of 7 7,500 per car. A total of 20 models of electric passenger vehicles meet the criteria of this legislative act. It requires that a subsidized electric vehicle be assembled in the United States, or a significant part of its components be assembled in certain countries that have a free trade agreement with the American side. BMW products, for example, in the United States can qualify for “preferential sales” of electric vehicles.
Products of Korean brands, which in the case of electric vehicles are still fully produced in South Korea, did not fall under these requirements, which caused serious concern not only to Korean businesses, but also to the president of the country, who was negotiating with his American counterpart to ease the requirements of the law. In the first quarter of this year, Hyundai products became the second most popular product in the US electric vehicle market after Tesla products, although they were limited to 9% of the market. Not wanting to lose ground in the future, Korean automakers were forced to build a local electric vehicle assembly plant in the United States.
The problem is that it will start operating only in the first half of 2025, and by that time Hyundai’s position may be replaced by other market participants. The Korean auto giant continues to hope that the authorities of the two countries will be able to agree on easing requirements for vehicles, the purchase of which will allow Americans to qualify for a tax deduction. In September, sales of Hyundai Ioniq 5 crossovers decreased immediately by 14% due to the consequences of the entry into force of the law.