SAVANNAH ― Korean and Hyundai Motor Group officials on Tuesday celebrated the groundbreaking for a $5.54 billion Georgia electric vehicle factory — and used the occasion to urge Washington to restore tax credits for plug-in vehicles that Hyundai currently makes in Korea until it can start production in the U.S.
Hyundai and other manufacturers that build EVs overseas in August lost eligibility for federal EV tax credits in President Joe Biden’s landmark health and climate law. The changes to the $7,500 tax credits are intended to boost domestic EV production. Biden’s push to electrify the nation’s vehicle fleet has led to billions of dollars in commitments for new EV manufacturing in the U.S., such as Hyundai’s project in Bryan County near Savannah.
But Hyundai has said the changes in the federal tax credits put their current vehicles at a competitive disadvantage until their U.S. operations can ramp up and their cars qualify again.
The festive mood of the Tuesday morning and afternoon festivities — complete with champagne toasts and a community rally with an auto show-like display of Hyundai, Kia and Genesis EVs — was also marked by moments of frostiness.
Tae-young Cho, the Korean ambassador to the United States, reminded attendees at Tuesday’s groundbreaking Biden’s visit to South Korea in May, where Hyundai’s Chairman Euisun Chung committed to building new EV and battery plants in the U.S. As he delivered the remarks, Democratic U.S. Sen. Jon Ossoff and Raphael Warnock, two supporters of the climate and health bill, sat in the front row.
Cho said Tuesday’s groundbreaking “establishes that Korean companies are responsible and trustworthy partners of the U.S.”
Cho seemed to indicate that the Korean government does not feel that Korea’s commitment has been reciprocated.
“Korean companies are now at risk of being disadvantaged by the EV credits of this act,” he said of the climate law. “We are working very, very hard to find a solution.”
Don Graves, deputy secretary for the U.S. Department of Commerce, who spoke after Cho, touted Biden’s work to cultivate relations with South Korea and his ambitious vision to limit climate change.
Credit: Richard Burkhart/Savannah Mornin
Credit: Richard Burkhart/Savannah Mornin
The Biden administration is pushing aggressive goals to make EVs 50% of all new vehicles sold in the country by 2030. Long-term, the law is expected to boost domestic manufacturing, proponents say, despite near-term heartburn. Hyundai’s EVs, along with those from other automakers, are critical to that mission.
In a statement, Biden said his plan to boost domestic manufacturing and infrastructure “continues to pay off for the American people, this time in Georgia.”
“This plant was announced during my trip to the Republic of Korea in May, and I am excited the groundbreaking is happening months ahead of schedule,” he said. Hyundai’s investment “will help boost the entire community around Bryan County with good jobs people can raise a family on, and ultimately help lower costs for the American people.
“This has been at the heart of the historic legislation we have passed over the past two years, and the last thing we should do is repeal it as Republicans in Congress want to do,” he said.
But Hyundai executives say the new climate law could now have the opposite effect in the near term, limiting consumer choice and slowing the electrification of the country’s vehicle fleet.
Hyundai has said since May that the Georgia plant will produce 300,000 EVs a year in its first phase and employ 8,100. José Muñoz, the president and chief operating officer of Hyundai Motor America, said Tuesday that production could eventually grow to 500,000 vehicles per year, involving “several” new models.
Credit: Richard Burkhart/Savannah Mornin
Credit: Richard Burkhart/Savannah Mornin
The final version of the Democrats’ bill, passed three months after Hyundai’s May announcement, included a number of changes to EV tax credits, including new materials sourcing and assembly requirements, plus income caps for eligible customers.
“Just a few months later we saw this (law) and were a little bit surprised,” Muñoz said.
Muñoz said vehicles produced at the future Bryan County plant might not be fully eligible for the credits until Hyundai can start producing batteries in 2026.
“The important thing for us is we fully embrace the Biden administration’s direction,” Muñoz told reporters Tuesday. “This issue is how do we handle the next two to three years. The impact is severe.”
Decreased U.S. sales could cost Hyundai significantly as it spends billions to expand its EV production.
Muñoz said he is hopeful the Biden administration can find an administrative fix that would give automakers like Hyundai a transition period without new legislation, which would face an uphill battle for passage through Congress.
State and local leaders recruited Hyundai with the promise of $1.8 billion in incentives, including property tax breaks and other inducements, in exchange for the promised 8,100 jobs.
Muñoz said Hyundai and other carmakers that signed binding economic development agreements with states for incentives that include jobs and production goals should receive accommodation.
Otherwise, the federal law change would cost automakers tax credits that reduce the cost of vehicles and some might face penalties from states if lost sales lead to reduced employment and production numbers.
“We’d get penalized twice,” Muñoz said.
The Biden administration, he said, has been sympathetic.
Warnock, who championed the climate law, recently introduced a bill to tweak the tax credit policy to delay the final assembly provision from going into effect until after Hyundai’s factory is operational. Several influential Georgia Republicans at the event told The Atlanta Journal-Constitution they were hopeful it would pass later this year.
Warnock also wrote a letter to the Treasury Department urging flexibility in implementation of the new tax credit rules.
-Staff writer Greg Bluestein contributed to this report.
A note of disclosure
This coverage is supported by a partnership with 1Earth Fund, the Kendeda Fund and Journalism Funding Partners. You can learn more and support our climate reporting by donating at ajc.com/donate/climate/
The story so far
The AJC first reported in September efforts by Hyundai Motor Group to lobby Washington for fixes to electric vehicle tax credits changed by the new climate and health bill and concerns the Korean auto giant could alter its plans to build a $5.54 billion EV plant near Savannah. On Tuesday, Hyundai held its ceremonial groundbreaking, but urged the U.S. for flexibility.
