Possibility of Electric Vehicle Sales Cliff Due to US Inflation Reduction Act
280,000 SUVs Recalled and Sales Halted Over Fire Concerns
Emerging as Largest Market Surpassing Korea and China... Active New Business Developments
At the 2022 New York Auto Show held last April, Chung Eui-sun, Chairman of Hyundai Motor Group (center in the photo), is taking a commemorative photo in front of the new Palisade. [Asia Economy Reporter Choi Dae-yeol] Chung Eui-sun, Chairman of Hyundai Motor Group, has embarked on a business trip to the United States. This move is interpreted as an effort to assess the market amid warning signs triggered by the enactment of the U.S. Inflation Reduction Act (IRA), which impacts the local electric vehicle market.
According to industry sources on the 24th, Chairman Chung boarded a flight to the U.S. via Gimpo International Airport the previous day. The trip is expected to last about a week, but the destinations and places to be visited have not been disclosed.
Chairman Chung's visit to the U.S. is seen as a response to the recently announced IRA. The IRA is a law that provides a tax credit of $7,500 (approximately 10 million KRW) only for electric vehicles that are finally assembled in the North American region.
Hyundai Motor and Kia have the second-highest market share in the U.S. electric vehicle market after Tesla, as their dedicated electric vehicles and eco-friendly exclusive models have been recognized for their product competitiveness and cost-effectiveness. Since local production of electric vehicles is expected to be possible no earlier than the second half of the year after next, until then, the companies have had to either bear sales incentives exceeding the tax credit themselves or endure significant sales disruptions.
Electric pickup truck R1T from Rivian in the United States. According to the recently implemented Inflation Reduction Act, a tax credit of $7,500 is now available only for electric vehicles assembled at local factories. Even as Hyundai Motor and Kia's sales in China, their previously largest market, have sharply declined, their overall sales performance has been sustained largely due to increased sales in the U.S. In addition to vehicle sales, the U.S. is also a key location for the group’s new business ventures related to future mobility such as Urban Air Mobility (UAM), autonomous driving, and robotics.
It is also expected that the recent issues of damages and large-scale recalls in the U.S. will be reviewed. The U.S. National Highway Traffic Safety Administration (NHTSA) decided to halt sales of the Hyundai Palisade and Kia Telluride due to fire concerns and recalled approximately 280,000 units of models from 2020 onward. The NHTSA stated that moisture accumulation inside the vehicles caused by external parts could lead to vehicle fires during driving or parking. Existing vehicle owners were advised to park their cars outdoors until repairs are made.
Both models are large sport utility vehicles (SUVs) and among the main sales models locally. They are designed for the U.S. market, where demand for large leisure vehicles is high. The Telluride is produced exclusively in the U.S. and, except for some exports to Latin America and the Middle East, is sold only in North America.
Among younger consumers, theft crimes targeting Kia vehicles have been rampant, prompting some regions to seek compensation. Some owners have filed lawsuits claiming that the manufacturer concealed defects, citing criminal acts related to the presence or absence of vehicle options.
The U.S. is the largest market for Hyundai Motor and Kia in terms of scale. Last year, local vehicle sales reached 1.49 million units, and about 830,000 units were sold up to last month this year. Hyundai Motor and Kia’s annual sales volume in South Korea, including commercial vehicles such as buses and trucks, is just over 1 million units. A Hyundai Motor Group official stated, "It is difficult to confirm detailed schedules of the management."
In May, U.S. President Joe Biden met with Chung Eui-sun, Chairman of Hyundai Motor Group (pictured left), during his visit to Korea. At that time, among Korean conglomerate heads, Chairman Chung was the only one to have a separate meeting with President Biden, where they finalized and jointly announced plans for a new electric vehicle factory.
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