Kia will push EV leasing to reap tax credit boon

Kia America will lean aggressively into an Inflation Reduction Act provision that allows it to pass down a $7,500 federal incentive to electric vehicle customers who opt to lease versus buy, according to Eric Watson, the automaker’s sales chief.

“There’s been a bit of a pause in the industry for some brands on electric vehicle sales as everyone sorted out the tax implications of the Inflation Reduction Act,” Watson explained.

Under the most recent changes to the act, an EV can only qualify for the federal $7,500 tax credit if its battery components were mostly assembled or made in North America and the materials for it were extracted or processed in the U.S. or in a country where the U.S. has a free-trade agreement, or from materials that were recycled in North America.

But until 2032, a provision in the law allows the $7,500 to be used as a discount off an EV’s price rather than as a tax credit, and the made-in-America barriers do not apply.
“Now that it’s all settled, every brand is going to see how they can use those provisions to best position their electric vehicles and build their business going forward,” Watson said.

“Leasing will be a key component of how Kia develops and sells its EVs until it can qualify for partial or full tax credit,” he said.

As a result of the tax credit changes, Kia expects leasing as a share of its EV business to increase from 15 percent now to 30 to 40 percent, Watson said.

Both of Kia’s EVs — the EV6 and Niro EV — are shipped from South Korea. Unless shoppers opt for a lease, they must forgo any incentive.

Kia’s third EV, the EV9, is a three-row crossover that will go on sale at the end of the year. Kia is retooling its plant in West Point, Ga., to start U.S. production of the 2024 EV9 next summer. But until then, it will be imported from South Korea.
Pricing has not been announced, but the EV9’s sticker price is expected to come in just below $80,000, which is the price cap set by Treasury for eligible electric SUVs.

More expensive EVs will bring buyers with a higher income, Watson said. But the act’s rules disqualify buyers from getting the tax credit it they have an individual income of over $150,000 or a household income over $300,000.

Leasing a more expensive EV will allow more buyers to take advantage of the incentive on the EV9, he said, stressing the importance of leasing as Kia continues to brings more EVs to market.