Senator Joe Manchin is pressing Treasury Secretary Janet Yellen to stand firm on North American-based manufacturing requirements for lucrative electric-vehicle tax credits under the Inflation Reduction Act, setting up a battle between the West Virginia Democrat and Korea's Hyundai Motor Co.
At stake is whether the Treasury would hand out the full $7,500 per vehicle in tax credits to more cars under a commercial-vehicle loophole. Manchin's requirements say that retail EVs must be assembled in North America and with batteries made with minerals from friendly trading partners to get full credit. Hyundai and the Korean government have pushed for a lenient interpretation of the rules and more time to be compliant so their imported EVs can qualify for credits.
"Unfortunately, I have heard that some automakers and foreign governments are asking your agency for a broad interpretation of 45W that would allow rental cars, leased vehicles and rideshare vehicles" to be eligible for the $7,500 commercial vehicle tax credit, Manchin wrote in a letter to Yellen made public Tuesday. "If these vehicles are deemed eligible, I can guarantee that companies will focus their attention away from trying to invest in North America."
Manchin, who provided Democrats a pivotal vote on the legislation, fought to include new limits on who could claim the tax credits, which he previously dismissed as "ludicrous." He argued that without tough rules mandating manufacturing in the U.S. and rules on content, the IRA would subsidize production in China and by other U.S. adversaries. The legislation, which provided a record $370 billion in spending to combat climate change, passed on a party-line vote in August.
Automakers like Ford Motor Co., General Motors Co. and Volkswagen AG already have battery and EV plants running or under construction in North America, while Hyundai recently broke ground on a $5.5 billion facility in southern Georgia. That gives competitors a head start of about three years over the company and Korean sibling Kia. The two brands have been expanding market share in the U.S. with popular electric models like the Hyundai Ioniq 5 and Kia EV6.
Hyundai and the Korean government have put up an aggressive lobbying campaign to persuade the Biden administration to tweak the bill or loosen enforcement. South Korean trade ministers and members of its assembly have reached out to their US counterparts in Washington to lobby for more time before the restrictions kick in, either through legislation or regulation. South Korean President Yoon Suk Yeol and other officials have brought up the issue in meetings with President Joe Biden and Vice President Kamala Harris as well.
In the latest push, Hyundai submitted
"Hyundai Motor Group requests that Treasury provide guidance to clarify that Section 45W(d)(3) does not preclude application of the credit to the lessor of a consumer vehicle lease as long as the consumer (lessee) in that transaction does not also claim the credit under Section 30D," the vice presidents of government affairs at Hyundai and its sibling Kia brand wrote in a Dec. 2 letter to Yellen.
The government of South Korea also submitted comments to Yellen suggesting that the 45W clause permit automakers to count commercial fleet sales to rideshare drivers as eligible for the $7,500 tax credit.
Hyundai didn't immediately respond to a request for comment.
South Korea is home to three of the world's largest EV battery makers. Korean manufacturers announced $25 billion in U.S. investment since Biden took office. That means the U.S. must decide how to placate an important trade partner and supplier without running afoul of the bill's intent.
The Treasury is still working to finalize guidance on the landmark legislation with additional guidance expected as soon as this week.
Manchin also said in his letter to Yellen that bending on enforcement of IRA provisions will allow automakers to, "continue with business as usual, putting our transportation sector further at risk."
