Foreign automakers are big mad about the new EV tax credit

Photo by Andrew Hawkins / The Verge

The electric vehicle credits signed into law by the president are still being processed by the auto industry. Foreign automakers are scrambling to find a loophole through the new rules that would seem to disqualify most of their EV fleets, while others are speeding up plans to build new factories in the US.

The tax credit for electric vehicles built outside of North America is not available. Three-fourths of the global battery market is controlled by China and the law includes provisions to prevent that.

The massive climate and energy bill is threatening legal action by two South Korean automotive companies. The two companies have the second highest share of the EV market in the US, but they don't currently produce any in the US, Canada, or Mexico.

According to the Financial Times, Chung Eui-sun, the billionaire scion ofHyundai's founding family and the chair of theHyundai Group, flew to Washington, DC, this week to urge lawmakers to reconsider the law's strict manufacturing and supply. According to The Korea Times, South Korean Foreign Minister Park Jin called the US Secretary of State to make some allowances for foreign-made EV's.

In order to be eligible for the tax credit, the plant would have to be built by the year 2025.

The EU claims that the law could violate the rules of the WTO. The European Commission believes that it is discriminating against foreign producers. It would be incompatible with the World Trade Organization.

Domestic automakers are struggling to make sure their own EV won't lose their tax credit eligibility if they use batteries from China. Chris Smith, chief government affairs officer at Ford, said that they were working overtime to increase production.

Other companies are making EV's in the US quicker. The Mercedes-Benz factory in Tuscaloosa, Alabama, has begun production of the 2023 EQS SUV using batteries supplied by a battery factory. The ID.4 electric vehicle is being produced at Volkswagen's factory in Tennessee.

More than $38 billion has been invested by the auto industry to bring battery production to the US. One of the largest battery factories in the world is expected to be built by Panasonic in Kansas.

This was Senator Joe Manchin's plan from the beginning. The West Virginia Democrat who was a key negotiator on the Inflation Reduction Act brushed aside concerns from foreign auto manufacturers about the law's limitations.

Manchin told reporters earlier this month that he would put a line on China if they did not get aggressive. I don't think we should be building a mode on the backs of foreign supply chains. I won't do it.

There may be some wiggle room. The new rules are being discussed, according to Senator Stabenow. Billions of dollars in new loans and grants are included in the law.