Photo: Xinhua/Ji Chunpeng
BEIJING, Feb. 2 (Xinhua) -- In a recent letter submitted to the U.S. government, Hyundai Motor Group complained that it is not practical to immediately remove foreign entities of concern (FEOCs) from the electric vehicle battery supply chain when it comes to certain key minerals. Washington's protectionist policies on EVs may backfire. It must recognise that the progress of any industry depends on compliance with the laws of the market. Any unauthorised interference may do more harm than good.
The South Korean automaker is concerned about a new U.S. regulation on electric vehicle subsidies that took effect in January under the Inflation Reduction Act. The regulation stipulates that starting this year, EVs that qualify for tax credits in the United States cannot contain battery components manufactured or assembled by any FEOC, including Chinese companies.
Given that China plays a significant role in the production of batteries for electric vehicles, this regulation is widely seen as a plan by Washington to discourage automakers from using Chinese battery suppliers. Data from think tanks and research groups show that approximately 70 % of global battery production capacity is located in China, and the country leads significantly in the number of lithium battery patents worldwide.
Washington's discriminatory subsidy policy implies that if EV companies in the United States want to benefit from tax breaks, they must restructure their battery supply chain and separate from China in this area. However, it is not easy for companies to change the supply chain structure that has been created by market activity. By doing so, they will suffer major losses due to increased costs. Therefore, Hyundai has described this move as unrealistic.
As The New York Times noted in a recent article, fewer electric vehicles will be eligible for U.S. federal tax credits in 2024 under stricter rules. This will only increase the cost of production for companies in the United States, and American consumers will ultimately foot the bill, hampering Washington's efforts to meet its green ambitions. Despite the increasing subsidies and financial support being offered to companies, this is not sustainable, said Henry Sanderson, executive editor of Benchmark Mineral Intelligence, in an article recently published in Foreign Affairs.
"Trying to compete with China on costs in every sector would likely waste taxpayer money, delay the energy transition and cause more damage from climate change," he said.
Xinhua/gnews.cz-JaV_07
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