Hyundai pleads with U.S. to provide exemptions for 'unrealistic' IRA

Industry

Published: 22 Jan. 2024, 17:05

Hyundai pleads with U.S. to provide exemptions for 'unrealistic' IRA

A Hyundai Motor employee works at its manufacturing plant in Montgomery, Alabama [HYUNDAI MOTOR]

Hyundai Motor called on the U.S. government to provide a temporary Inflation Reduction Act (IRA) exemption, stating that not sourcing raw materials from China is "unrealistic" currently.

The Korean automaker demanded a temporary exemption on a limited number of critical materials such as graphite considering that countries like China are already dominating the supply chain, according to its statement to the U.S. government.

"For instance, China refined and produced 100 percent of the spherical graphite and 69 percent of the synthetic graphite worldwide in 2022," the statement read. "It is unlikely that other countries will be able to replace China in the short-term."

Graphite is the main aspect in anodes, one of four critical components in EV batteries.

Under the tightened IRA, which began in 2024, an eligible clean vehicle may not contain any battery components that are “manufactured or assembled by” a foreign entity of concern (FEOC), to qualify for up to $7,500 in tax credits.

Starting in 2025, an eligible clean vehicle “may not contain any critical minerals that were extracted, processed or recycled by an FEOC."

A FEOC is one owned, controlled or subject to the jurisdictions of China, Russia, North Korea and Iran, according to the U.S. Department of the Treasury's guidance.

With the law coming into effect, the list of EV models eligible for the credits was sharply cut to 19 from last year's 43. No Hyundai and Kia EVs are allowed to receive any credits as they have no assembly plants in North America, though one is expected to start production at the end of the year.

Hyundai also requested the government to apply a “de minimis rule,” which allows companies to be exempt from the rule if a certain type of critical mineral takes up less than 10 percent of the total value of the battery minerals.

"We strongly believe that this proposal reflects the reality faced by the industry as a whole and that it is impractical to completely eliminate FEOCs immediately from the supply chain of certain applicable critical minerals used in the manufacture of batteries and battery components," it said.

Hyundai also called on the list of non-traceable battery materials to be unveiled as soon as possible.

Korean battery makers are also constantly complaining about the regulations, demanding the U.S. government make a change or offer a grace period.

SK On demanded it postpones the rule until Jan. 2027 for it to find an alternative supply chain, mainly graphite.

LG Energy Solution has requested exemptions for certain materials from the tariff list. Specifically, materials that constitute less than 10 percent of the total value, such as cobalt and graphite.

BY SARAH CHEA [chea.sarah@joongang.co.kr]