Hyundai Motor Co. is doing everything it can to take advantage of a loophole in the Biden Administration’s new US federal EV tax credit. The rule is allowing Hyundai to ensure, at least temporarily, that its EVs remain competitive in the US by being eligible for the full $7,500 credit.
The revamped US EV tax credit has a number of strict rules that make most EVs ineligible, though many of those official rules haven’t gone into place yet. In the meantime, there have been some loopholes that are allowing automakers to take advantage of credit eligibility that’s likely going to go away soon.
One such loophole, or “provision,” as reported by Automotive News, allows the customer to get the full credit if they choose to lease a new EV. While the new credit rules make Hyundai ineligible since its electric cars are all built in South Korea, the automaker can take the credit and apply it to the lease deal and pass the saving on to its customers. CEO of Hyundai and Genesis North America Jose Muñoz shared with the publication:
“We’ve tried to maximize the utilization of the so-called 45W paragraph, which allows for sales through the lease channel to benefit from the $7,500 tax advantage.”
“We believe the consumers are the ones who are losing because they will not be able to benefit other than a lease.”
Reportedly, the tax credit doesn’t have the same strict rules when it’s applied to the lease via the provision. There’s no North American requirement, and the lender gets the credit and can choose to apply it however it chooses.
Hyundai sells the Kona Electric, Ioniq 5, and Ioniq 6 in the US, and has big plans to beef up its EV lineup going forward. The automaker has proven it can make compelling EVs and has been ahead of much of the competition. However, the new tax credit rules in the US have put a dent in its EV market share.
Eventually, the automaker, along with its subsidiaries Kia and Genesis, will likely produce electric vehicles on our shores, which will make its EVs eligible for at least a portion of the new tax credit. Hyundai already has plans to invest $5.5 billion in an EV and battery factory in Savannah, Georgia, for its future vehicles, along with those produced by Genesis and Kia.
In the meantime, Genesis’ Electrified GV70 already qualifies for the $7,500 tax credit since Hyundai produces the electric SUV in Montgomery, Alabama. However, the official battery manufacturing and materials sourcing rules take effect on April 18, 2023, after which very few EVs, if any, will be eligible for the full credit. We’ll have to wait and see what happens with the leasing loophole.