Kia to Produce EVs in the U.S. from 2024 to Utilize IRA Tax Credit Rules
- September 20, 2022
- Posted by: Quatro Strategies
- Category: Manufacturing
Kia is expected to start producing electric vehicles in the United States from 2024 in order to benefit from the new Inflation Reduction Act (IRA) tax credit rules. The IRA that was signed into law by Biden last month excludes the likes of Hyundai and its affiliate Kia from tax credits because they don’t produce EVs in North America. The ruling has impacted their short term EV ambitions in the United States.
The climate provisions of the IRA includes a huge change to the EV tax credit, both expanding its application to make it available for 10 more years and simpler to claim for consumers (it will be available at point-of-sale starting in 2024).
The intent of the law is not just to take action on climate change, but to boost American manufacturing in the green energy sector.
As a result, the changes also include new provisions that make foreign built EVs ineligible for tax credits. The main limiting provision is a requirement that EVs undergo final assembly in North America in order to qualify for credits.
Now that the law is in place, foreign-assembled cars no longer qualify for any credits at all. There are other requirements based on battery material sourcing, but those haven’t yet been finalized.
Since the law was signed, many manufacturers have already announced new production facilities in the U.S. or have brought forward plans to build EVs in the U.S.
One of those manufacturers is Hyundai, which already builds gas cars in the US and was planning to build EVs as well, but announced last month that it wants to speed up the timeline. Since Hyundai and Kia each owns a significant stake in the other, it’s not surprising that Kia would make a similar announcement soon after Hyundai.
Over the last year, Kia and Hyundai have led other non-American companies in US sales of EVs, though the change in EV tax credits has dealt a blow that might leave them in a slump for a little while until they can start EV manufacturing in the US.
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