Trade, Industry and Energy Minister Lee Chang-yang, right, speaks during a meeting with executives of car and battery companies at the Korea Chamber of Commerce and Industry building in Seoul, Tuesday. Courtesy of Ministry of Trade, Industry and Energy

By Baek Byung-yeul

The government vowed Tuesday that it will continue working to minimize the impact of the U.S. Inflation Reduction Act (IRA), which excludes buyers of electric vehicles (EVs) assembled outside North America from tax credits, by setting up short-, medium- and long-term goals.

In the short term, the government will support domestic companies exporting eco-friendly cars for commercial purposes, as commercial vehicles assembled outside North America are still eligible for tax credits.

Given the U.S. Senate and the House of Representatives have each proposed amendments to the IRA, the Korean government will continue to deliver its opinions to the U.S. Congress on why the act needs to be revised, as one of its medium-term goals.

Also, in the long run, the government plans to come up with measures so that Korean companies can benefit from the IRA in eco-friendly energy businesses such as batteries, solar power, wind power and nuclear power.

The IRA became law in August, and consumers who purchase EVs assembled or manufactured outside North America are unable to qualify for a tax credit of $7,500. Starting next year, the IRA will also require EVs qualifying for the tax credit to use critical battery materials sourced from the U.S. or countries with which it has free trade agreements. Also, components of the EV batteries need to be manufactured or assembled in North America.

To discuss the issue, the Ministry of Trade, Industry and Energy held a meeting with domestic companies in the related industries. The meeting featured executives of Hyundai Motor, LG Energy Solution, Samsung SDI, SK On, POSCO Chemical, Hanwha Q Cells, CS Wind, SK Materials, the Korea Automobile Manufacturers Association and the Korea Battery Industry Association.

"The government will do its best to maximize the benefits from the IRA and minimize the burden," Trade, Industry and Energy Minister Lee Chang-yang said. "With the domestic industries, we plan to push for short, medium- and long-term measures to respond to the IRA."

The industry ministry admitted that it will be difficult to have the law revised by delivering opinions alone, but it will continue to contact the U.S. Congress on revising the IRA to suspend the requirement for EV tax credits proposed for three years. Trade Minister Ahn Duk-geun will meet with U.S. government officials in December to deliver the opinions of the domestic companies.

Given the IRA aims to increase the U.S.' capability in the eco-friendly energy sector to counter climate change, Korea also plans to develop ways for domestic companies to benefit from tax incentives related to various kinds of eco-friendly energy sources.