The Inflation Reduction Act of 2022 contains an awkward provision for U.S.-Korea relations.
Formerly known as the Build Back Better Act, the Inflation Reduction Act of 2022 was signed into law by President Joe Biden on Aug. 16. It had passed the House of Representatives on Sept. 27, 2021.
It needed to pass through the Senate next to get to Biden’s desk for the signature that would make it a law. But negotiations in the Senate faced some political hurdles, the most notable of which was getting the Democrats to agree unanimously on the details.
The Senate was divided 50 to 50 among Democrats and Republicans. No Republicans were going to vote for the bill. So the only way it would pass was for all 50 Democrats to vote for it and then for Vice President Kamala Harris to cast the tie-breaking vote as required by the U.S. Constitution.
Originally a $3.5 trillion bill, the Build Back Better Act, after vigorous legislative negotiations, eventually was renamed the Inflation Reduction Act of 2022. Its price tag was reduced to $737 billion, less ambitious but still a massive spending bill by any measure. It passed the Senate 51 to 50 on Aug. 7, with the Vice President casting the deciding vote.
The law has provisions for Affordable Care Act subsidies, lowering prescription drug prices, investing in domestic energy, tax reform and promoting clean energy.
Tax Credit Catches Hyundai Off-Guard
One aspect of the clean energy requirements is already having an effect on individuals and auto manufacturers. A purchaser of an electric vehicle (EV) is eligible to claim a tax credit of $7,500, but now this applies only if the vehicle’s final assembly occurs in North America.
This caught Hyundai Motor Group off-guard. All its vehicles are manufactured overseas and this tax credit change was implemented according to the law as soon as it was passed. So it’s already in effect.
“Sales of the Hyundai Ioniq 5 crossover SUV in the United States slumped around 14% in September from the previous month, hit by the new U.S. law,” Reuters reports.
As currently written, the law would make 2026 the earliest year that Hyundai EVs manufactured in the U.S. would be elegible for the tax credit.
Hyundai Breaks Ground On EV Plant
It’s against this backdrop that South Korea’s Hyundai held a groundbreaking event Oct. 25 for a $5.5 billion electric vehicle plant thirty miles west of Savannah, Ga.
In attendance were Republican Gov. Brian Kemp and the state’s two Democratic Senators, Raphael Warnock and Jon Ossoff. The site of the future plant takes up 3,000 acres in Bryan County.
The plant is Hyundai’s largest investment outside South Korea. Construction and then manufacturing at the plant will be the biggest economic development project ever in Georgia.
Atlanta Journal-Constitution reporter Scott Trubey posted these photographs of the event on Twitter.
José Muñoz, the president and chief operating officer of Hyundai Motor America, said the facility will be “the foundation of Hyundai Motor Group’s future in North America,” according to the Atlanta Journal-Constitution.
Korean ambassador to the United States Tae-young Cho told the Journal-Constitution the law is unfortunate for Korean-U.S. relations and for fighting climate change. But he said both governments are working to find a solution.
“Warnock, who championed the Inflation Reduction Act, 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,” the newspaper reported. “He also wrote a letter to the Treasury Department urging flexibility in implementation of the new tax credit rules.”