05/10/2022
The United States' Inflation Reduction Act
A recently-passed piece of major domestic legislation in the United States is causing huge controversy in South Korea.
On August 16 this year, the Inflation Reduction Act (IRA), worth USD $740 billion in total and consisting of USD $440 billion in policy enforcement and USD $300 billion in fiscal deficit reduction, was signed into law by U.S. President Joe Biden. In response to climate change, it stipulates that 375 billion will be invested to reduce greenhouse gas emissions to 40% by 2030.
To this end, it also includes tax deductions of up to USD $4,000 for used cars and up to USD $7,500 for new cars that meet certain requirements, in order to expand the supply of electric vehicles. However, electric vehicles using Chinese core minerals and batteries will be excluded from the benefits, and only electric vehicles using batteries and core minerals produced in North America.
All Korean electric vehicles, including the Hyundai Ioniq 5 and the Kia EV6, which are currently sold in the U.S., are produced in Korea, raising concerns that they will be at a disadvantage. If Korean electric vehicles are excluded from the subsidy benefits, it is highly likely that Hyundai’s plan to lead the U.S. electric vehicle market by introducing new lineups such as the Ioniq 6 and the EV9 next year will be disrupted.
In May, President Biden visited Korea and thanked Samsung Electronics and the Hyundai Motor Group, which decided to make large-scale investments in the United States side by side, leaving with a huge bundle of investments. This is why some say that Korea has been hit in the back of the head by the U.S. At the time of Biden's visit to Korea, there was criticism that Korea has gained nothing. Adding the exclusion of subsidies for Korean electric vehicles has cast serious doubt on the government’s diplomatic abilities.
Yoon Kwan-seok (윤관석), chairman of the National Assembly's Trade, Industry, and Energy Small and Medium Venture Business Committee (산업통상자원중소벤처기업위원회), urged the government to take comprehensive measures, saying, "We are also preparing a congress resolution to express concerns about discrimination against Korean electric vehicles and batteries."
As it stands now, South Korea is at the mercy of lawmakers in the United States. Unfortunately, with midterm elections coming up in November in the U.S., it seems unlikely that legislators would move to make it easier to import foreign made automobiles. Furthermore, it remains unclear how effective the Yoon administration's lobbying will be given that the IRA was such a major accomplishment for the Biden administration.
Read the full story at our newsletter: https://maily.so/kommon.site/posts/50b4ca69
