Top Kia Executive Has Something To Say About Biden's Inflation Reduction Act

Nov. 27, 2022 3:46 PM ET byJay Traugott Government /9 Comments

And what it could do to EV sales.

Kia of America's Chief Operating Office, Steve Center, is concerned about how theInflation Reduction Act(IRA), passed last summer, will impact electric vehicle sales and marketing in the US. Speaking toAutomotive News, Center said that "to have anything just changed 'presto change-o' is very disruptive to everybody. You have the whole industry aggressively developing and getting ready to manufacture electric cars… and you go in, you change it and it disrupts everybody's planning."

His concern is this: in order to qualify for the $7,500 tax credit, courtesy of the IRA, you have to purchase a vehicle that was not only assembled in North America but also a fairly high number of its battery materials as well. That's an immediate challenge for non-domestic US carmakers, like Toyota, who vocally took issue with some aspects of the law.

For Kia and its sister brands Hyundai and Genesis, the situation is a bit different. Plans are already in place to build amassive new EV manufacturing facility, budgeted at $5.54 billion, not far from Savannah, Georgia. A second plant is also coming to build certain EV components. This past week, we reported about the possibility of another new Georgia facility, one dedicated solely to battery production, though Hyundai Motor Group has not confirmed this yet.

Despite the South Korean automaker's commitment to US manufacturing, those manufacturing complexes won't come online until for a few more years, and the vehicles they'll produce, possibly theKia EV6and the just-revealedHyundai Ioniq 6, won't be eligible for the tax credit until March 2026. Right now, however, the IRA is a challenge, rather than a benefit.

"We're going to make the cars and there's a certain cost given the technology maturity and scale that we're at today," Center said. "So it makes things very difficult for us to comply with both what we want to do and the aspirational objectives of the government."

Essentially, there's currently a limited number of IRA-eligible vehicles for the mainstream market, rather than early adapters, so the tax credit will have a "detrimental impact. The dollars are a little more dear to the [middle of the market]," Center summarized. "And there's only so much discounting a manufacturer can do."

The IRA and the government's intentions are good, but timing is everything. "We are going forward, but they're just making it a lot harder."