In the ongoing trade war under U.S. President Donald Trump's "America First" policies, several Korean companies, notably Hyundai Motor, have either already invested in the U.S. or are making further investments as a quid pro quo for Korea to secure a better position in tariff negotiations. However, U.S. House Republicans drafted a bill that adds to the trade war challenge, which will heavily impact the electric vehicle sector and affect Korean motor and battery companies.
Released Monday by the House Ways and Means Committee, the draft bill targets a range of incentives, including tax credits for electric vehicles (EVs) and solar and wind projects. Specifically, the draft framework aims to pull up the deadline for the Section 30D tax credit by six years, which would significantly affect companies like Hyundai Motor, the third-largest seller of EVs in the U.S. market.
The original Inflation Reduction Act (IRA) stipulates that Section 30D tax credits — such as a $7,500 credit for consumers who buy an EV from an automaker whose final assembly occurs in the United States and that meets certain standards regarding the core minerals and batteries used — are available until Dec. 31, 2032. However, the new draft bill would end the consumer vehicle credit by the end of 2026, with a stipulation that only carmakers who have sold fewer than 200,000 EVs by the end of this year would be eligible to receive it in 2026.
For companies like Hyundai, which have sold over 200,000 electric vehicles in the past six years, the consumer vehicle credit will end at the start of next year. American carmakers such as Tesla and General Motors will also be affected, but for Korean and other foreign companies that have invested in the United States, it delivers an unforeseen blow.
It's not only the automakers. The draft bill also has a provision to end the Advanced Manufacturing Productivity Credit (AMPC) for Korean battery companies by the end of 2031, instead of early 2033. Korean batteries such as LG Energy Solution, Samsung SDI and SK On are some of the Korean beneficiaries of the AMPC benefits.
As it stands, the bill needs to be approved by both the House and Senate. Genevieve Cullen, the president of the U.S. Electric Drive Transportation Association, criticized the proposal for its short-sightedness, stating that it aims "to abandon U.S. leadership in energy innovation by gutting federal investment in electrification." Republican legislators from states such as Georgia, Michigan and Ohio know that each plant built by Korean firms provides thousands of skilled manufacturing jobs. For a company like Hyundai Motor, which announced a massive $21 billion investment over the next four years in March, this proposal represents a bait and switch. Against this backdrop, the draft bill overlooks the work and efforts of Korean companies that have been investing in the United States, as well as the government's early negotiations over tariffs with the Trump administration.
Without a doubt, the incentives outlined in the IRA are a pledge made by the former Biden administration. Since his second campaign, Trump has vowed to repeal the IRA. However, any regulation governing business interactions between two nations is also a matter of trust and should be upheld at least in principle, regardless of a change in the U.S. administration.
The incentives in the IRA compelled Korean companies to invest in the United States. Changing the rules under the new administration goes against international standards of respectful bilateral interaction between nations, especially given the unprecedented and aggressive attempt to rewrite tariffs and trade rules, which has unnerved many trading partners. The U.S. president did affirm that tariffs will be applied to both friends and foes alike, but both nations should remember that Korea, a U.S. ally, has companies investing trillions of won in the United States, with each plant creating thousands of jobs for Americans.