South Korea’s EV Uproar: Challenging Biden’s Manufacturing Mandates
South Korea’s automotive industry is reeling from recent legislative changes in the United States, expressing profound disappointment over a policy that threatens their substantial investments and burgeoning success in the American electric vehicle market. The sentiment of betrayal is palpable, with figures like Kwon Oh-hwan, a long-serving labor organizer at Hyundai Motor, lamenting that his company feels “stabbed in the back” by these developments from its key ally.
US Policy Blindsides South Korean Auto Giants
Just months prior, in May, South Korea’s largest automaker, Hyundai, had announced an ambitious plan to inject over $10 billion into the U.S. by 2025. This significant investment was earmarked for establishing new electric vehicle production facilities and battery manufacturing plants, seen as crucial for Hyundai’s long-term prosperity and a testament to the strengthening economic partnership between South Korea and the United States. This commitment came as Hyundai, along with its affiliate brand Kia, had surged in the U.S. EV sales charts this year, claiming the impressive position of being second only to Tesla in the number of electric vehicle units sold. However, this promising trajectory was abruptly disrupted in August with the announcement of the U.S. Inflation Reduction Act (IRA). To the shock of the South Korean auto sector, the IRA specified that its new $7,500 tax credits for electric vehicles would only apply to models assembled in North America. Since Hyundai and Kia currently manufacture their EVs in South Korea, their popular electric models were immediately excluded from these vital consumer incentives, directly undermining their market competitiveness.
The situation presents a significant diplomatic and economic challenge for both Washington and Seoul. For South Korea, a critical trading partner and security ally, the exclusion feels like a punitive measure despite its proactive investments in the U.S. For the Biden administration, it highlights the complex trade-offs inherent in domestic industrial policy, potentially alienating key allies while aiming to bolster local manufacturing. Resolving this dispute will be crucial for maintaining robust U.S.-South Korea relations and ensuring fairness in the evolving global electric vehicle landscape.
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