Regulations sans Subsidies
Hyundai Motor Group is facing another difficulty as the United States strengthens automobile emissions regulations while Hyundai is unable to receive electric vehicle subsidies due to the Inflation Reduction Act (IRA).
According to the industry on July 9, Hyundai criticized the vehicle emission regulation proposal (draft) released by the U.S. Environmental Protection Agency (EPA) on July 5 (local time) as being based on “overly optimistic assumptions” and “not sufficiently reflecting the major challenges facing the market in all respects.”
The regulation proposal contains content to reduce the carbon dioxide and fine dust emitted by new cars by an annual average of 13% from 2027 to 2032. According to this, the emission limit per mile (1.6 km) in 2032 will be 82 g, which is 56% lower than the 2026 target. To meet this, automobile companies must sell 60% of new cars as electric vehicles by 2030 and 67% by 2032.
This is a much higher level than the self-target of Hyundai Motor Group, which is showing aggressive actions by boasting a strategy as an electric vehicle leader. According to the standard presented through “Hyundai Motor Way” last month, the target for new electric vehicle sales in the United States in 2030 is 53%. If the EPA’s regulatory proposal is finalized, the electric vehicle sales volume must be pulled up by approximately 7 percentage points.
Looking at the U.S. sales volume (801,800 units) of Hyundai Motor Group in the first half of this year, the proportion of “eco-friendly cars,” including electric cars and hybrid cars, is 16.2% (133,171 units). Among them, pure electric cars are only 38,457 units (4.69%). This means that this figure must be raised to 60% within about 7 years.
It is not easy to raise the sales ratio of electric vehicles so quickly. It may only be advantageous for companies that are virtually pure electric vehicle companies, such as Tesla. In response, the American Automobile Innovation Alliance, which includes General Motors (GM), Toyota, Honda, Volkswagen, Ford, and Stellantis Group, stated last month that “it should be relaxed and reconsidered before helping strengthen China's position.”
China, which was a weak player in the era of internal combustion engines, quickly switched to electric vehicles and became a major producer of pure electric vehicle markets along with the battery market. Although China has been blocked by the IRA regulations, the influence of Chinese companies in the United States could be strengthened through electric car batteries.
The situation where American car companies are collaborating with Chinese battery companies through a detour is also a burden for Hyundai Motor Group. Due to the U.S.-China economic conflict, the IRA was created, and Hyundai Motor Group must avoid Chinese companies in battery supply. However, U.S.-based Ford and GM are rather creating a joint venture in the U.S. with China’s number one battery company, CATL. An industry insider said, “Korean companies could become a sandwich state.”