Hyundai’s best years in the U.S. are being tested by the Inflation Reduction Act


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SAVANNAH, Ga. Hyundai Motor Group He is living his best years in the United States

The South Korean automaker has successfully transitioned from thrifty cars and dancing hamsters to competing with giant automakers in the lucrative American market.

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The company’s Hyundai, Kia and Genesis brands are expected to capture about 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 best-selling electric cars this year. year, only behind Tesla through the third quarter.

But whether the world’s fourth-largest automaker by sales last year will be able to continue its winning streak, especially in electric vehicles, is questionable. In August, Hyundai buyers lost federal tax credits for electric vehicle purchases due to program changes under the Biden administration’s Inflation Reduction Act.

Local automakers, including Hyundai’s closest rivals in electric vehicles — Tesla, Ford Motor and General Motors – still eligible for credit. All of Hyundai’s electric vehicles are currently imported into the United States, although it makes a few gas-powered models at plants in Alabama and Georgia.

Hyundai Motor Co. CEO Jaehoon “Jay” Chang described the loss of incentives as “a very difficult 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 hiccups.

“The IRA, in the short term, it puts some restrictions on us in terms of customer choice,” Chang told CNBC last month as the company celebrated the groundbreaking of a new $5.5 billion electric vehicle and battery plant in Georgia. “For the long term … we have a very solid plan. … I think we can be competitive.”

Hyundai, including Genesis and Kia, is owned by the same parent company based in Seoul, South Korea, but operates separately mainly in the United States.

Navigation IRA

Hyundai, Kia and other non-domestic automakers have strongly objected to the new electric vehicle tax credit rules under the IRA. 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 government officials in the United States and South Korea to change the rules or exempt the automaker, Chang said. U.S. officials have confirmed that such discussions are ongoing, including a meeting last week between U.S. Trade Representative Katherine Tai and South Korean Trade Minister Ahn Dukgeun.

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

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

CNBC | Michael Wayland

The executives also note that the US and South Korea have a tariff-free agreement for vehicles. (Cars built in Mexico and Canada are still eligible for the credit.)

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

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

EV loans or not, executives said the new Georgia plant, announced months before the IRA’s passage, marks the culmination of growth for Hyundai in the United States. -New products in recent years.

“We’re trying our best, but to be honest, it’s always difficult, being this type of innovative disruption. But I think so far, I hope we’re on the right track to meet customer needs,” Chang said. “We like to be different.”

“Different” products

Look no further than Hyundai’s new cars to prove that the company is “different.” The automaker looks set to launch the futuristic-looking Kia EV6 and Hyundai Ioniq 5 into space.

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

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

Scott Mlyn | CNBC

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

“Telluride is attracting more affluent, younger, better-educated customers, and they’re all over it. It’s a real game changer,” Center said, calling SUVs and EVs a “golden age” for Kia. “We’re looking at more and we’re going to grow as fast as we can.”

SUVs and EVs followed the automaker’s surprising and well-received entry into the luxury market in 2015 with the Genesis brand..

Genesis has performed well in prestigious rankings by Consumer Reports, JD Power and others. Last week at the Los Angeles Auto Show, Genesis made headlines with a new convertible concept car, and its G90 sedan was named the 2023 Motor Trend Car of the Year.

Genesis X Convertible concept EV

Creation

“Design language has been a big differentiator for us,” Chang said. “We will give the designer freedom.”

Even the company’s Kia Carnival minivan – a segment many have given up on – has won praise for its SUV-like design and functionality.

The rise of Hyundai

The rise of Hyundai and Kia is impressive compared to other non-domestic automakers.

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

Based in Japan, Toyota has spent decades building up sales in the United States. It entered the US auto industry in 1957 with small cars and in 2002 achieved 10.4% market share in the US. It is now the world’s largest car manufacturer by sales in recent years.

Hyundai hit the 10% U.S. market share mark last year, nearly 10 years faster than Toyota, according to LMC Automotive. The research and forecasting firm expects Hyundai’s US market share to reach 10.7% before falling to 9.7% in 2025 as a new plant in Georgia is expected to begin production of electric vehicles.

“I think Hyundai, Kia and Genesis have really compressed that time frame. They’ve really gone from just being bargain basement cars to competitive cars to competitive luxury in a very relatively quick time frame,” he said.

Sales of Hyundai and Kia vehicles have grown nearly 61% since 2010, reaching more than 1.4 million vehicles in the U.S. 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 car sales. Hyundai’s all-electric vehicle sales are expected to account for 9.2% of the US EV market this year, according to LMC forecasts. While sales are expected to increase, that percentage is seen as the company’s peak until at least 2024 or 2025, when the new Georgia plant is up and running.

Making it into the top five in the world, Hyundai’s production remains below that of Toyota and Volkswagen. Munoz said that the new plant in Georgia is expected to produce 300,000 cars a year, and in the future this number will reach 500,000. The company’s two current plants in the United States can produce up to 730,000 vehicles a year.

“Our plan in the U.S. is to grow,” Hyundai Motor America CEO Randy Parker told CNBC earlier this month. “It all comes down to power dictating how much we can grow.”

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



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