US Surpasses Europe in Eco-Friendly Car Exports, Approaching 40% Share... The Issue is 'IRA'

Electric Vehicle and Hybrid Exports to US Account for 37.5%
Surging Local EV Demand Due to High Oil Prices
"Product Quality and Price Competitiveness" Increase Preference for Korean Eco-Friendly Cars
Uncertain Future Outlook Due to Inflation Reduction Act Impact

Hyundai Motor Company Ulsan Plant Export Shipping Wharf Adjacent Yard

[Asia Economy Reporter Choi Dae-yeol] As South Korea's eco-friendly car exports increase, nearly 40% of the volume is destined for the United States. This is due to rising local demand following the Biden administration's efforts to expand the adoption of eco-friendly vehicles. However, this trend is unlikely to continue steadily. Under the Inflation Reduction Act (IRA), eco-friendly cars not produced locally are not eligible for tax credit benefits.

According to an analysis of statistics from the Korea International Trade Association on the 19th, the export value of electric vehicles and hybrid cars from the beginning of this year through last month totaled $11.4044 billion. Eco-friendly car exports have played a significant role in increasing the overall automobile export value, surpassing $1 billion each month this year.

By country, the volume headed to the United States is overwhelmingly large. During the same period, electric vehicle exports to the U.S. amounted to $2.39632 billion, and hybrid car exports were $1.36385 billion, totaling over $4.2 billion. This accounts for 37.5% of the total eco-friendly car export value. This means that more than one out of every three eco-friendly cars manufactured domestically and exported is sold in the U.S. On a monthly export value basis, in March and August, the share of exports to the U.S. exceeded 40% of total exports.

While automobiles are the largest traded goods between the U.S. and South Korea, the situation with eco-friendly cars is somewhat different. Until last year, South Korea exported more electric vehicles to the UK and Germany than to the U.S. Europe has actively promoted electric vehicle adoption for several years under the premise of addressing climate change. The U.S., home to the world's largest electric vehicle maker Tesla with local factories, had been slower to adopt electric vehicles compared to China and Europe, resulting in relatively lower eco-friendly car exports. Since President Biden took office, incentives such as significantly expanding charging infrastructure and broadening subsidy eligibility have rapidly increased electric vehicle demand.

Korean electric vehicles have been evaluated as performing well in the U.S., where the market is just beginning to bloom. However, future competition conditions will be challenging. Due to the Inflation Reduction Act, foreign electric vehicles are no longer eligible for a $7,500 (approximately 10 million KRW) tax credit, which is likely to reduce demand for Korean electric vehicles locally.

Hyundai Motor and Kia, which are responsible for virtually all of South Korea's electric vehicle exports, will only begin operating dedicated electric vehicle plants in the U.S. around 2025. This is a burden as manufacturers with local plants such as General Motors (GM) and Ford, as well as European automakers like Volkswagen and BMW, are introducing new models in the U.S. and intensifying promotional activities.

An industry insider said, "Even in the U.S., the prolonged high oil prices, incentives, and expansion of charging infrastructure are rapidly increasing eco-friendly car adoption," adding, "During the process of establishing detailed regulations for the Inflation Reduction Act, we need to negotiate with the U.S. to secure an exemption for Korean electric vehicles."

This content was produced with the assistance of AI translation services.