The law seeks to reduce the auto industry’s reliance on China, which makes most of the world’s batteries and dominates the processing of raw materials. The law also establishes limits on sales prices and excludes individuals who earn more than $150,000 a year and couples who make more than $300,000. The rules also exclude vehicles made outside North America, including in allied countries like South Korea and Germany.
“We were not happy,” José Muñoz, the chief executive of Hyundai and Genesis Motor North America, said in an interview at the New York International Auto Show this month. Hyundai’s Ioniq 6 electric sedan was named World Car of the Year at the show, but will not be eligible for tax credits because it is assembled in South Korea.
Hyundai, based in Seoul, is investing $10 billion to build car and battery plants in Georgia, which will allow the company to meet the Inflation Reduction Act requirements — but not for several years.
Officials at the carmaker and the South Korean government asked the Biden administration to allow Hyundai and Kia cars to qualify for credits while the factories were under construction, but were told that the law did not allow such an exception, Mr. Muñoz said.
The Hyundai car factory in Georgia is expected to begin producing cars in 2025. The battery plant, which Hyundai is building with SK On, will start production in 2026. “We are working on putting ahead that date so we can qualify earlier,” Mr. Muñoz said.
Tesla had already told potential buyers that the least expensive version of the Model 3 sedan would qualify for only half the credit, or $3,750. This month, Tesla cut the price of that car by $1,000 to $41,990. After the partial credit is accounted for, the car will effectively cost many buyers a little more than $38,000, about as much as a top-of-the-line Honda Accord and cheaper than an entry-level BMW 3 Series sedan.
Other versions of the Model 3 and Model Y S.U.V. will continue to receive the full credit. Tesla sold more electric vehicles in the United States last year than all other carmakers combined, according to Kelley Blue Book.