Gary Zhou 
President Biden’s new electric vehicle incentive system is now under review following a formal complaint from South Korean officials.
Foreign and domestic automakers were quick to criticize the electric vehicle tax incentive system found within the Inflation Reduction Act. Manufacturers stated that the requirements for qualifying for incentives would mean that the vast majority of vehicles would not be eligible and hence, would limit consumer choice. However, the policy is now under review after significant pushback from the South Korean government.
Most notably, the incentive system requires that vehicles be assembled in the U.S. Eventually, the regulation will also require ever-increasing amounts of battery materials and components to be sourced domestically to qualify for incentives. And one company that has been hit particularly hard by these regulations is Hyundai/Kia. The South Korean manufacturer currently has no U.S.-based EV manufacturing, and its first facility capable of this will open in 2025.
According to Reuters, the U.S. now plans to review EV incentive changes after a security meeting between the U.S, South Korea, and Japan was held in Hawaii on Thursday. It is unclear if this review will lead to any change in policy.
However, despite this review, the U.S. might not be out of the woods yet. South Korean officials have gone as far as claiming that the new EV incentive structure breaks the bilateral free trade agreement between the two countries, which could give them grounds to file formal complaints at the UN or World Economic Forum.
In an attempt to negotiate, Reuters states that Soel has suggested that the U.S. postpone implementing the incentives until Hyundai/Kia can establish their manufacturing facility in Georgia.
South Korea is pointing out a definite weak spot of the Inflation Reduction Act. While the policy has certainly incentivized U.S. production and assembly of vehicles and batteries, this is coming at the cost of many U.S. relationships, especially in countries with significant automotive sectors; South Korea, Japan, and Germany.
