Hyundai’s best years in the US face the test of the Biden Inflation Reduction Act

Drew Angerer | News from Getty Images | Getty Images

SAVANNAH, Ga. — Hyundai Motor Group has his best years in the USA

The South Korean automaker has successfully transitioned from cheap vehicles and dancing hamsters to competing against impressive automakers in the highly profitable American market.

The company’s Hyundai, Kia and Genesis brands are expected to capture nearly 11% of the US new car market this year — the highest level since the automaker entered the country in 1986. It will also be among the top -Electric vehicle sellers own year, trailing only Tesla through the third quarter.

But whether the world’s fourth-largest automaker by sales last year can continue its winning streak, particularly in electric vehicles, is questionable. In August, Hyundai buyers lost federal tax credits related to electric vehicle purchases due to changes in the program under the Biden administration’s anti-inflation bill.

Domestic automakers, including Hyundai’s closest electric vehicle competitors – Tesla, Ford engine and General Motors – still entitled to the loan. All of Hyundai’s electric vehicles are currently imported into the US, although it produces several gas-powered models at plants in Alabama and Georgia.

Hyundai Motor Co. CEO Jaehoon “Jay” Chang described the loss of incentives as worrying and a “very challenging issue” in an exclusive interview with CNBC. But he said he believes the automaker can continue its long-term growth in the U.S. despite the near-term hiccup.

“IRA, in the short term, limits our customer choices,” Chang told CNBC last month as the company broke ground on a new $5.5 billion electric vehicle and battery plant in Georgia. “Long term … we have a very solid plan. … I think we can be competitive.”

Hyundai, including Genesis, and Kia are owned by the same parent company based in Seoul, South Korea, but operate largely separately in the US

navigate IRA

Hyundai, Kia and other foreign automakers have been vocal opponents of the IRA’s new EV tax credit rules. The law, passed by Congress in August, immediately eliminated a tax credit of up to $7,500 for plug-in hybrid and electric vehicles imported from outside North America and sold in the United States

Hyundai is working closely with officials in the US and South Korea to change the regulations or secure an exemption for the automaker, Chang said. US officials confirmed such talks are underway, including a meeting between US Trade Representative Katherine Tai and South Korea’s Trade Minister Ahn Dukgeun last week.

Hyundai argues that its investment in Georgia — the largest economic development project in that state’s history — should count for something like an IRA audit.

Hyundai executives and government officials will break ground on the automaker’s new “Metaplant America” ​​in Bryan County, Georgia on Tuesday, October 25, 2022.

CNBC | Michael Wayland

Executives also mention the US and South Korea have a duty-free offer available for vehicles. (Vehicles built in Mexico and Canada continue to qualify for the credits.)

Jose Munoz, Hyundai Motor’s global president and chief operating officer, has declined to disclose a specific financial impact related to the loss of the loans, but described it as a big hit to the automaker’s bottom line.

Steven Center, Kia America’s chief operating officer, said the IRA’s intentions were good for America, but they “pulled the rug out from under everyone’s feet.”

EV credits aside, executives said the new Georgia plant, announced months before the IRA passed, is the culmination of growth for Hyundai in the US -in-about its new products in recent years.

“We try to do whatever we can, but honestly, being innovative disruptors is always a challenge. But I think so far, hopefully we’re on the right track to address customers’ needs.” Chang said. “We like to be different.”

“Other products

Look no further than Hyundai’s new vehicles for the company to prove it’s “different”. The automaker’s futuristic-looking Kia EV6 and Hyundai Ioniq 5 appear ready to take off into space.

Meanwhile, Hyundai Palisade and Kia Telluride SUVs have been among the most sought-after vehicles in the country since their launch in 2019.

The Kia EV6 will be on display at the April 13, 2022 New York Auto Show.

Scott Mill | CNBC

Executives noted that the launch of both the Telluride and Palisade, followed by the Kia EV6 and Hyundai Ioniq 5, were key turning points in the company’s product roadmaps.

“The Telluride attracts wealthier, younger, better educated customers, and they are all conquests. It’s a real game changer,” Center said, calling the SUVs and EVs “golden cycles” for Kia. “We’re looking at more and will grow as soon as possible.”

The SUVs and electric vehicles followed the automaker’s surprise and well-received entry into the luxury market with the Genesis brand in 2015.

Genesis has performed well in influential rankings from Consumer Reports, JD Power, and others. At last week’s Los Angeles Auto Show, Genesis won recognition with a new convertible concept vehicle, and its G90 sedan was named 2023 Motor Trend Car of the Year.

Genesis X Convertible Concept EV

genesis

“The design language was the big differentiator for us,” Chang said. “We will give the designer freedom.”

Even the company’s Kia Carnival minivan — a segment many have abandoned — has won awards for its SUV-like styling and functionality.

Hyundai’s Rise

The rise of Hyundai and Kia is impressive compared to other foreign automakers.

“When they came out, they had a reputation for just being cheap,” said Jake Fisher, senior director of auto testing at Consumer Reports. “Over the years it’s gone from cheap to cheap to really very competitive.”

Japan-based Toyota spent decades building sales in the US. It entered the US auto industry with small cars in 1957 and achieved a 10.4% market share in the US in 2002, according to public records. It is now the world’s largest automaker by sales in recent years.

According to LMC Automotive, Hyundai reached the threshold of 10% of the US market share last year, about 10 years faster than Toyota. The research and forecasting firm expects Hyundai’s U.S. market share to peak at 10.7% before falling to 9.7% in 2025 as electric vehicle production is expected to begin at the new Georgia plant.

“I think what Hyundai, Kia and Genesis have done is they’ve really compressed that time frame. They have gone from bargain-priced vehicles to competitive vehicles to competitive luxury in a very relatively quick time frame,” Fisher said.

Hyundai and Kia vehicle sales have increased by around 61% since 2010 to more than 1.4 million vehicles in the US last year. Despite an expected drop in sales this year due to supply chain issues, the company is expected to gain market share.

The situation is similar with the sale of electric vehicles. LMC forecasts that Hyundai’s all-electric vehicle sales are expected to account for 9.2% of the US electric vehicle market this year. While sales are expected to increase, that percentage is believed to be the company’s peak until at least 2024 or 2025, when the new Georgia plant is expected to come online.

Hyundai’s production, which puts it in the top 5 in the world, remains lower than that of Toyota and Volkswagen. Munoz said the new Georgia plant is expected to produce 300,000 vehicles annually, with the potential to reach 500,000 in the future. The company’s two current US plants can produce up to 730,000 vehicles annually.

“In the US, we want to grow,” Hyundai Motor America CEO Randy Parker told CNBC earlier this month. “It all comes down to capacity, which will determine how much we can grow.”

Hyundai is investing $5.5 billion in a new electric vehicle plant in Georgia

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