US Midterm Elections Approaching... "IRA Amendment Must Be Released Within This Year"

Republican Advantage Expected
"Impact to Intensify Early Next Year"

U.S. President Joe Biden is signing the 'Inflation Reduction Act,' which focuses on addressing climate change and expanding healthcare coverage, at the White House in Washington, DC. Image source=AP Yonhap News

[Asia Economy Reporter Kiho Sung] As the U.S. midterm elections approach, there is growing anticipation that the Inflation Reduction Act (IRA), which has been a stumbling block for our automotive industry, may be revised. This is because the Republican Party, which is expected to have the upper hand, opposes the Inflation Reduction Act. However, considering the current strong trend of America First policies, there are also cautious views that a full revision of the Inflation Reduction Act may not be easy.

The U.S. will hold its midterm elections on the 8th (local time). The current situation is reported to have the Republican Party slightly ahead of the ruling Democratic Party.

Key Republican figures have already expressed opposition to the Inflation Reduction Act. According to foreign media, Senator Lindsey Graham emphasized the need to revise the Inflation Reduction Act, and House Republican Leader Kevin McCarthy announced that on the first day of becoming the majority party, they would repeal the budget related to the Inflation Reduction Act. Additionally, some Democratic lawmakers have introduced a bill to suspend certain tax benefits of the Inflation Reduction Act.

The Inflation Reduction Act is a law that grants tax benefits, a kind of subsidy, only to North American-made electric vehicles. Due to the passage of this law, since its implementation in August, Korean-made electric vehicles sold in the U.S. market have been excluded from subsidy eligibility. Currently, all Hyundai and Kia electric vehicles sold in the U.S. market are produced in Korea.

Within the domestic industry, there is a call for changes to the Inflation Reduction Act within this year. Industry experts point out that the direct impact of the Inflation Reduction Act is not yet clearly reflected in sales figures. Currently, purchasing a Hyundai or Kia electric vehicle in the U.S. requires a waiting period of about six months after the contract. In other words, the volume sold in October was contracted around April to May. Since the U.S. Inflation Reduction Act took effect on August 16, vehicles contracted before that date are eligible for subsidies.

Experts note that considering this, the effects of the Inflation Reduction Act will become more pronounced from the first half of next year. Therefore, they emphasize the need to prepare active countermeasures from after the U.S. midterm elections until the first half of next year. According to foreign media, contracts for Hyundai and Kia electric vehicles have decreased by about 30% since the implementation of the Inflation Reduction Act.

Professor Pilsoo Kim of the Department of Future Automotive Studies at Daelim University said, "The Korean-made electric vehicles sold in the U.S. currently were contracted before the Inflation Reduction Act was implemented, so they are eligible for subsidies. However, since the impact of the Inflation Reduction Act will become significant in the first half of next year, changes are necessary within this year."

However, there is also a pessimistic view that even after the elections, a full revision of the Inflation Reduction Act will not be easy. The Bank of Korea stated in its 'Overseas Economic Focus' published on the 6th, "Even if the Republican Party gains the majority, amending or repealing an already enacted law requires the consent of both houses and the president's approval, so the possibility of changes to the law as a result of this election is considered low."

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