IRA Tax Incentive Effects... Toyota and Tesla Head to the U.S.

Establishment of Electric Vehicle and Battery Production Plant
Global Electric Vehicle Industry Faces Major Shift

Toyota Photo by Yonhap News

[Asia Economy Reporter Lee Ji-eun] Japanese automaker Toyota has decided to establish a new production base in the United States. Tesla has also decided to increase its production share in the U.S. while scaling down plans for a European factory. The Inflation Reduction Act (IRA), implemented by the Biden administration to protect U.S. industries, is shaking up the global electric vehicle (EV) industry landscape. Although the IRA bill has faced strong opposition from major countries, companies that cannot afford to give up the U.S. market are expected to expand EV production in the U.S.

The Nihon Keizai Shimbun reported on the 22nd that Toyota will begin EV production in the U.S. starting in 2025. Toyota plans to build a vehicle battery factory in North Carolina by 2025. They will establish a production line capable of handling everything from parts manufacturing to assembly. The existing production facilities at the Kentucky plant will be modified to produce both gasoline and electric vehicles. Toyota estimates that if an efficient production system is established in the U.S., EV production could increase to 1 million units by 2026, accounting for about 20% of all vehicles produced in the U.S.

Toyota judged that increasing production in the U.S. and receiving tax credit benefits under the IRA would be advantageous. The Biden administration decided to provide subsidies of up to $7,500 (approximately 9.783 million KRW) per vehicle only for EVs using batteries and critical minerals produced in the U.S. Establishing a battery factory in the U.S. is also favorable for maintaining market share. Currently, the U.S. accounts for one-fifth of Toyota’s global vehicle sales.

Tesla Photo by Yonhap News

Tesla has also scaled down its plan to build a finished battery factory in Germany. Instead, it will carry out some production stages in the U.S. According to major foreign media on the day, the Brandenburg State Ministry of Economics in Germany issued a statement that Tesla has halted plans to produce finished products at the battery factory near Berlin.

This appears to be a withdrawal of production plans to take advantage of the U.S. government’s tax credit benefits. Originally, Tesla planned to produce finished batteries with an annual capacity exceeding 50 gigawatt-hours (GWh) at the Gr?nheide factory on the outskirts of Berlin. Earlier, Tesla announced last month that it would invest $3.6 billion to build an EV battery factory and an electric truck ‘Semi’ factory near the Gigafactory in Reno, Nevada, U.S. Tesla plans to produce 2 million units of the new 4680 batteries annually at this site.

Korean companies are also accelerating local production in the U.S. to directly overcome the challenges posed by the IRA. Hyundai Motor Group has partnered with SK On to build a large-scale battery factory in Georgia, U.S. On the 21st (local time), Hyundai shipped its first electric SUV model ‘G70’ produced at its Alabama plant.

These moves by automakers increase the possibility that the EV industry could be reorganized around the U.S., as intended by the Biden administration. Major foreign media reported on the 5th that "France and Germany even warned the U.S. not to divert European investments ahead of the European Union (EU) summit," and that due to the impact of the IRA, the U.S., Canada, and others are sweeping up global corporate investments.

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