Hyundai is on a hot streak in the US, but Biden’s Inflation Reduction Act could spoil it

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Drew Anger | Getty Images News | Getty Images

SAVANNAH, Georgia — Hyundai Motor Group is having its best years ever in the US

The South Korean automaker has successfully moved from cheap cars and dancing hamsters to competing with formidable automakers in the highly profitable US market.

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The company’s Hyundai, Kia and Genesis brands are expected to capture nearly 11% of the U.S. new vehicle market this year — the highest level since the automaker entered the country in 1986. It will also be among the top sellers of electric vehicles this year. belong. years, only lagging behind Tesla through the third quarter.

But whether the world’s fourth-largest automaker can continue that winning streak by sales from last year, especially in EVs, is open to question. In August, Hyundai buyers lost federal tax credits associated with the purchase of an electric vehicle due to program changes under the Biden administration’s Inflation Reduction Act.

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

Hyundai Motor Co. CEO Jaehoon “Jay” Chang, in an exclusive interview with TSTIME, described the loss of incentives as concerning and a “very challenging problem.” But he said he believes the automaker can continue its long-term growth in the US despite the short-term crisis.

“IRA, in the short term, it gives us some constraint in customer choice,” Chang told TSTIME last month as the company celebrated the groundbreaking celebration of 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 Seoul, South Korea-based parent company, but largely operate separately in the US.

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Navigate IRA

Hyundai, Kia and other foreign automakers have been vociferous opponents of the IRA’s new electric vehicle tax credits. The law, passed by Congress in August, immediately removed a tax credit of up to $7,500 for plug-in hybrid and electric vehicles imported from outside North America and sold in the U.S.

Hyundai is working closely with government officials in the US and South Korea to change regulations or grant the automaker an exemption, Chang said. US officials confirmed such talks are underway, including a meeting last week between US trade envoy Katherine Tai and South Korean Commerce Minister Ahn Dukgeun.

Hyundai argues that its investment in Georgia — the largest economic development project in that state’s history — should count toward an IRA review.

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

TSTIME | Michael Wayland

Executives also note that the US and South Korea have a tariff-free deal on vehicles. (Vehicles built in Mexico and Canada are still eligible for the credits.)

Jose Munoz, Hyundai Motor’s global president and chief operating officer, declined to disclose any specific financial impact related to the credit loss, but described it as a huge blow to the automaker’s profits.

Steven Center, chief operating officer of Kia America, said the IRA’s intentions are good for America, but they “pulled everyone’s carpet out”.

EV credits or not, executives said the new Georgia plant, announced months before the IRA was passed, is the pinnacle of growth for Hyundai in the US. -in on its new products in recent years.

“We’re trying to do everything we can, but honestly it’s always a challenge because we’re the kind of innovative disruptor. But I think so far hopefully we’re on the right track to respond to the needs of the customer,” Chang said. “We like to be different.”

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‘Different products

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

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

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

Scott Mlynn | TSTIME

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

“The Telluride is attracting wealthier, younger, more educated customers, and they’re all conquests. That’s a real game-changer,” Center said, referring to the SUVs and EVs as “gold bikes” for Kia. “We’re looking at more, and we’re going to grow as quickly as possible.”

The SUVs and EVs followed the automaker’s surprising 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 took home a new convertible concept vehicle, and its G90 sedan was named Motor Trend Car of the Year 2023.

Genesis X Convertible concept EV

Genesis

“The design language has been the big differentiator for us,” said Chang. “We are going to give the designer freedom.”

Even the company’s Kia Carnival minivan — a segment many have abandoned — has earned praise for its SUV-like design and functionality.

The rise of Hyundai

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

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

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

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Hyundai reached the 10% market share threshold in the US last year, about 10 years faster than Toyota, according to LMC Automotive. 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 at the new Georgia plant is expected to to start.

“I think what Hyundai, Kia and Genesis have done is they really compressed that time frame. They went from low cost cars to competitive vehicles to competitive luxury in a really really relatively quick time frame,” Fisher said.

Hyundai and Kia vehicle sales are up about 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 still expected to gain market share.

It’s a similar story for electric vehicle sales. LMC forecasts that Hyundai’s all-electric vehicle sales are expected to account for 9.2% of the US EV market this year. While sales are expected to grow, that rate is seen as the company’s peak until at least 2024 or 2025, when the new Georgia factory goes online.

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

“In the US, our plan is to grow,” Randy Parker, CEO of Hyundai Motor America, told TSTIME earlier this month. “It all comes down to capacity that determines how much we can grow.”

Hyundai invests $5.5 billion in new electric vehicle plant in Georgia

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