Hyundai Motor Co. is making the most of a loophole in the new US federal EV tax credit implemented by the Biden Administration, which allows its electric vehicles (EVs) to remain competitive in the US market. While the rule has strict regulations that disqualify most EVs, some loopholes are allowing carmakers to take advantage of credit eligibility that may soon be eliminated.
One such provision enables customers to receive the full credit if they lease a new EV. Although Hyundai’s EVs are ineligible for the credit under the new rules because they are all manufactured in South Korea, the automaker can apply the credit to its lease deal and pass on the savings to its customers. According to the CEO of Hyundai and Genesis North America, Jose Muñoz, “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.”
Muñoz believes that customers are the ones losing out on the credit because they will not be able to benefit from it beyond leasing. However, the tax credit doesn’t have the same rigorous requirements when it’s applied to a lease via the provision. There’s no need for North American production, and the lender can choose to apply the credit however it wants.
Hyundai currently sells the Kona Electric, Ioniq 5, and Ioniq 6 in the US and has ambitious plans to expand its EV lineup. Although the new tax credit rules have impacted its EV market share, the automaker, along with its subsidiaries Kia and Genesis, will likely manufacture EVs in the US in the future, making its vehicles eligible for a portion of the new tax credit. Hyundai has already committed to investing $5.5 billion in an EV and battery factory in Savannah, Georgia.
Meanwhile, Genesis’ Electrified GV70 already qualifies for the $7,500 tax credit since Hyundai manufactures 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.
It remains to be seen how the leasing loophole will play out, but Muñoz believes that Hyundai is taking the right steps to remain competitive in the US market. “We believe that the leasing of EVs will become more popular in the coming years, and this tax advantage will be crucial for many people who can benefit from it,” he said. “We will continue to do everything we can to maximize the benefit for our customers.”
