Consider incentives equal to reduced subsidies
Hyundai Motor and Kia “It is likely to cost more than 600 billion won a year”
“As the recognition of ‘Hyundai’ increased, I was barely able to get the right price.”
A plan to convert the Alabama plant to an electric vehicle line is also being considered.
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The light of the Hyundai Motor Group’s foot fell due to the ‘Inflation Reduction Act (IRA)’ signed by US President Joe Biden on the 16th (local time). As Korean electric vehicles were excluded from the subsidy provided by the US government to buyers, the weakening of competitiveness became inevitable.
From the 17th, when the law came into effect, subsidy payments to consumers who purchased the Ioniq 5 and Kia EV6 at Hyundai Motors branches in the United States were stopped. This bill supports subsidies only for electric vehicles produced locally in the United States, as all of the IONIQ 5 and EV6 are currently being produced and exported at Ulsan plant in Korea.
Experts predict that Hyundai Motor Group’s electric vehicle production in the U.S. will begin at the earliest from 2025, and that there is no vehicle that can replace the Ioniq 5 and EV6, which are the mainstays of expanding U.S. market share, so it is inevitable that the performance will suffer.
According to the automakers on the 19th (Korea time), the method of providing incentives to local consumers as much as the subsidy cut by the Hyundai Motor Group through IRAs is being discussed as a countermeasure against the Inflation Reduction Act.
As such, it is important for Hyundai Motor Group to maintain its market share in the North American electric vehicle market. Hyundai Motor Group’s share of the North American electric vehicle market is 9%, ranking second after Tesla (70.1%).
The stumbling block is cost. Hyundai Motor Group sold 34,518 electric vehicles in the US market in the first half of this year. If the company subsidizes the $7,500 (about 9.8 million won) that consumers have been receiving in a different way, it would cost about 330 billion won, or over 600 billion won annually.
Hyundai Motor achieved record sales and operating profit in the second quarter, thanks in part to the fact that it was able to sell the car at a higher price while reducing sales incentives to consumers thanks to excess demand that far exceeded supply in the US market. If incentives equivalent to electric vehicle subsidies are provided to local consumers to defend their market share, these factors for improving earnings will disappear.
Kim Jin-woo, a researcher at Korea Investment & Securities, said, “(Hyundai Motor Group) is estimated to have saved an all-time high of 620.8 billion won by reducing incentives. came down,” he explained.
If the situation becomes urgent, it may be possible to devise a plan to produce other electric vehicle models at the Alabama plant in the United States through consultation with the union.
It is a plan to change a part of the Alabama factory line that produces the GV70 electrified model from November to a line exclusively for electric vehicles. In this case, consultation with the union is necessary. When deciding on overseas production of major car models, the management is supposed to consult with the union. Hyundai Motor Group’s electric vehicle-only plant to be built in Georgia, US, will not be operational until 2025.
An official from the auto industry said, “Since the production line usually runs according to the plan for one or two years, it is difficult to change to another model right away. unknown,” he said.
Lim Eun-young, a researcher at Samsung Securities, said, “If we do not advance electric vehicle production in the U.S., we may miss the opportunity to dominate the market, so a decision is urgently needed.”
President Biden met with Chairman Chung during a visit to Korea in May about the decision of Hyundai Motor Group Chairman Chung Eui-sun to invest more than $10 billion in the United States, including the Georgia plant, and said, “Once again, thank you for choosing the United States. I want to express my will, and the U.S. government will also work hard so that I will never be disappointed in my investment decision.”
Reporter Noh Jeong-dong, Hankyung.com [email protected]