Delegation heads to U.S. to express concerns about EV act

Home > Business > Economy

print dictionary print

Delegation heads to U.S. to express concerns about EV act

Korean government delegation including Trade, Industry and Energy Ministry’s Deputy Minister for International Trade and Legal Affairs Ahn Sung-il leaving for U.S. at Incheon International Airport on Monday. [YONHAP]

Korean government delegation including Trade, Industry and Energy Ministry’s Deputy Minister for International Trade and Legal Affairs Ahn Sung-il leaving for U.S. at Incheon International Airport on Monday. [YONHAP]

A government delegation on Monday traveled to Washington to protest the recently-passed U.S. Inflation Reduction Act (IRA), which grants subsidies to domestically-manufactured electric vehicles (EV).  
 
The delegation will be visiting the U.S. Trade Representative, the Treasury Department, the Commerce Department and Congress during its three-day visit, according to a joint statement from the Ministry of Trade, Industry and Energy, the Ministry of Foreign Affairs and the Ministry of Economy and Finance released Monday.
 
The statement noted that the visit is a preliminary meeting ahead of Trade Minister Ahn Duk-geun's visit to the United States next month for the Indo-Pacific Framework (IPEF) meeting.  
 
"We plan to raise the issue of negotiation regarding the IRA to a higher level with Trade Minister Ahn's visit," the statement noted.
 
No possibile solutions to the impasse were mentioned in the statement, and Korean leaders have noted that an adjustments to the law could be difficult given the political climate in the United States.
 
The Yoon Suk-yeol government is facing intense public criticism over its failure to act swiftly to protect Korean companies from the IRA, which U.S. President Joe Biden signed on Aug. 16.  
 
Korea carmakers and battery makers argue that the act will make it more difficult to compete in the U.S. market.  
 
Under the terms of the act, automobiles will be eligible for the full $7,500 EV tax credit if the vehicle is assembled in the U.S. and if the batteries are made with a certain percentage of components and materials from the United States or from countries with which the United States has a free trade agreement (FTA).  
 
The rule on assembly is effective from Aug. 16, and the rule on batteries is effective Jan. 1, 2023.
 
The content requirements for batteries will phase in over a number of years. In 2023, 40 percent of critical mineral value will have to come from the United States or FTA countries. That number increases 10 percentage points a year to 80 percent in 2027.
 
In 2023, 50 percent of battery component value will have to come from the United States. That number will increase 10 percentage points a year to 100 percent by 2029.  
 
To qualify for the subsidy, a vehicle can have no battery components at all from China to qualify from 2024. In 2025, a vehicle can have no critical minerals from China.    
 
In the first seven months of 2022, Hyundai Motor and Kia sold a combined 39,000 units in the United States, and together they have a 9 percent share.  
 
By 2030, the goal for their combined share in the United States is 25 percent.
 
Tesla's Model 3 retails for $46,990, whereas Hyundai Motor's Ioniq 5 retails $39,950. These prices are after subsidy.  
 
Without the $7,500 subsidy, the Ioniq 5 costs $47,450, making it more expensive than its competition.  
 
While Hyundai Motor is planning to build an EV factory in Georgia, with the capacity to manufacture 300,000 cars a year, it won't be completed until 2025. Kia has no plans to build an EV production plant in the U.S.  
 
In meeting with Indiana Governor Eric Holcomb on Friday, Yoon expressed concerns about the IRA.  
 
According to the president's office on Friday, during the meeting, Yoon asked for the governor's support so that Korean companies will enjoy the same benefits without discrimination.  
 
Samsung SDI is currently building an EV battery production plant in Indiana, which is scheduled to go into production in the first quarter of 2025.  
 
Foreign Minister Park Jin made the same request to Daniel Kritenbrink, U.S. Assistant Secretary of State for East Asian and Pacific Affairs, who was visiting Seoul on Friday.  
 
The Foreign Minister emphasized the massive investments in the United States and Korea's participation in Biden's Indo-Pacific Economic Framework.  
 
Euisun Chung, executive chair of Hyundai Motor, last week traveled to the United States with Hyundai Motor CEO Gong Young-woon.  
 
"There are those who point out that the IRA legislation is tax discrimination against Korean EV and battery industries by the United States," said Yoon Kwon-suk, Democratic Party lawmaker and chair of the National Assembly's Trade, Industry, Energy, SMEs and Startups Committee. "This goes against the economic and national security alliance, WTO trade subsidies, the FTA between the two countries and the IPEF."
 
The Korean Minister of Trade, Industry and Energy Lee Chang-yang during a meeting with officials from the automobile and battery companies last week downplayed the possibility of the Korean government bringing the issue to the WTO.  
 
Minister of Trade, Industry and Energy Lee Chang-yang on Monday said the IRA might violate the FTA and WTO rules.  
 
“The possibility of violation is high, and if needed, we will take the case to the WTO if needed,” Lee said when asked by the Democratic Party lawmaker at the National Assembly.  
 
“Under the KorUS FTA, we could choose between FTA or WTO process,” Lee said. “While we would have to compare the two, there is the possibility of working with other countries, such as Japan and EU member states, who are in the same position if we take the issue to WTO.”  
 
Lee Chang-yang, Minister of Trade, Industry and Energy, at the National Assembly on Monday. [JOINT PRESS CORPS]

Lee Chang-yang, Minister of Trade, Industry and Energy, at the National Assembly on Monday. [JOINT PRESS CORPS]

 
 
 

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)