The planned U.S. tax incentives for the purchase of electric vehicles have drawn criticism from the European Union as well as South Korea, which claims they may prejudice against vehicles built abroad and violate WTO regulations.
Congress would lift the threshold on the current $7,500 tax credit for buyers of electric vehicles under the $430 billion energy and climate package that the U.S. Senate approved on Sunday, but there would be restrictions, such as prohibiting vehicles not made in North America from obtaining the credit.
After President Joe Biden approves the measure, tax credits for vehicles made outside of North America will no longer be allowed.
The proposed regulation also contains clauses designed to forbid the use of battery parts or essential minerals that come from China.
Speaking on behalf of the European Commission, Miriam Garcia Ferrer claimed that it is discriminatory and disadvantages international producers in comparison to American companies.
He continues by stating that this would make it irreconcilable with the WTO.
In a news briefing, Garcia Ferrer stated that the EU concurred with Washington that credits are a crucial incentive to boost EV demand, encourage the switch to sustainable transportation, and lower greenhouse gas emissions.
She stated that they must make sure the new policies are impartial and free from discrimination. Therefore, they keep urging the US to amend the measure to eliminate these discriminatory provisions and bring it into full compliance with WTO regulations.
On Thursday, South Korea added that it had warned the United States about the possibility of the bill contravening WTO regulations and a bilateral open trade agreement. The U.S. trade authorities have been asked to relax the standards for battery components and the final vehicle assembly, according to a statement from South Korea’s trade ministry.
The commerce ministry of South Korea met with the producers of batteries Samsung SDI, LG Energy Solution, and SK as well as the automobile maker Hyundai Motor Co (005380.KS). To avoid being at a disadvantageous position in the American market as a result of the bill, the corporations requested Seoul’s cooperation, based on the statement.
Using the Free Trade Agreement between the U.S. and South Korea as justification, the SK auto industry organisation announced on Friday that it had written to the U.S. House of Representatives asking that the country include EVs and battery components made or assembled in South Korea as qualifying for U.S. tax incentives.
According to a statement from the Korea Automobile Manufacturers Association (KAMA), Korea is extremely concerned about features in the recent U.S. Senate’s EV tax incentive plan that will discriminate against EVs and batteries built in North America over those that are imported. It claimed that South Korea has been providing subsidies for electric vehicles built in the US.
The current legislation severely restricts EV access as well as options for Americans, and Hyundai stated that this may significantly slow the market’s transition to sustainable mobility.
Recently, Hyundai, which imports its top-of-the-line electric vehicles from Korea, announced investments worth $10 billion in the United States, including EV production in Alabama and Georgia.
The majority of EV vehicles won’t qualify for tax subsidies since battery components and essential minerals must be obtained from North America, a consortium of major automakers stated last week. The Inflation Reduction Act, which is included in the EV tax relief, is anticipated to be approved by the House of Representatives on Friday before being forwarded to Vice President Biden for his signature.
