SAVANNA, Ga. — Hyundai Motor Group is experiencing its best years in the United States
The South Korean automaker has successfully transitioned from cheap vehicles and dancing hamsters to competing with formidable automakers in the highly lucrative American market.
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The company’s Hyundai, Kia and Genesis brands are expected to capture nearly 11 percent of the U.S. new-vehicle market this year, marking the highest level since the automaker entered the country in 1986. It is also destined to be among the top sellers of electric vehicles this year, only final Tesla through the third trimester.
But whether the world’s fourth-largest automaker by sales last year can continue that streak, especially in electric vehicles, is up for debate. 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 competitors in EVs – Tesla, Ford engine And General Motors — still qualify for the credit. All of Hyundai’s electric vehicles are currently imported into the United States, 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 CNBC, described the loss of incentives as worrying and a “very challenging matter.” But he said he believes the automaker can continue its long-term growth in the US despite the short-term hiccups.
“IRA, in the short term, gives us some limits on customer choice,” Chang told CNBC last month as the company celebrated the grand opening 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 are owned by the same parent company headquartered in Seoul, South Korea, but operate largely separately in the U.S.
Navigating the IRA
Hyundai, Kia and other non-domestic automakers have openly opposed new electric vehicle tax credit regulations under the IRA. The law, passed by Congress in August, immediately eliminated a tax credit of up to $7,500 for plug-in electric and hybrid vehicles imported outside of North America and sold in the U.S.
Hyundai is working closely with public officials in the United States and South Korea to change regulations or grant the automaker an exemption, Chang said. US officials have confirmed that such discussions are ongoing, including a meeting last week between US Trade Representative Katherine Tai and South Korean Trade Minister Ahn Dukgeun.
Hyundai says its investment in Georgia — the largest economic development project in that state’s history — should count for something in terms of overhauling the IRA.
Hyundai executives and government officials pave the way for the automaker’s new “Metaplant America” in Bryan County, Georgia on Tuesday, October 25, 2022.
CNB | Michael Weland
The executives also note that the United States and South Korea have a duty-free agreement for vehicles. (Vehicles built in Mexico and Canada are still eligible for credits.)
Jose Munoz, global president and chief operating officer of Hyundai Motor, declined to disclose a specific financial impact associated with the credit loss, but described it as a major blow 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’ve pulled the rug out for everyone.”
EV credits or not, executives said the new Georgia plant, announced months before IRA approval, is the pinnacle of growth for Hyundai in the United States. They attributed the progress to a systematic improvement approach over decades and a decisive strategy to go all-in on its new products over the past few years.
“We’re trying to do everything we can do, but honestly it’s always a challenge, being the disruptive innovative kind of thing. But I think so far, hopefully we’re on the right track to answer customer needs,” Chang said. “We like to be different.”
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, the Hyundai Palisade and Kia Telluride SUVs have been among the hottest vehicles in the country since they launched in 2019.
The Kia EV6 on display at the New York Auto Show, April 13, 2022.
Scott Mlyn | CNBC
Executives noted that the introduction of both Telluride and Palisade, followed by the Kia EV6 and Hyundai Ioniq 5, were major turning points in the company’s product plans.
“Telluride is attracting wealthier, younger, more educated customers, and they’re all gains. This is a real game changer,” Center said, referring to SUVs and EVs as “golden cycles” for Kia. “We are watching more and will grow as fast as possible.”
SUVs and EVs followed the automaker’s surprising and well-received entry into the luxury market under the Genesis brand in 2015.
Genesis has performed well in Influencer Rankings by Consumer Reports, JD Power, and others. At last week’s Los Angeles Auto Show, Genesis won kudos with a new convertible concept car, and its G90 sedan was named 2023 Motor Trend Car of the Year.
Genesis X Convertible concept EV
“The design language was the big differentiator for us,” said Chang. “We will let the designer have the freedom.”
The company’s Kia Carnival minivan, a segment many have shunned, has also garnered accolades 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 first came in, they had a reputation for just being cheap,” said Jake Fisher, senior director of automated testing at Consumer Reports. “Over the years, it’s gone from cheap to value to really, really competitive.”
Japan-based Toyota has spent decades building U.S. sales. It entered the US auto industry with small cars in 1957 and achieved 10.4 percent market share in the US in 2002, according to public filings. It is now the world’s largest automaker by sales in recent years.
Hyundai hit the 10 percent U.S. market share mark last year, according to LMC Automotive, about 10 years ahead of Toyota. The research and forecasting firm expects Hyundai’s U.S. market share to peak at 10.7 percent before falling to 9.7 percent in 2025 as it is expected to begin production of EVs at its new plant in Georgia.
“I think what Hyundai, Kia and Genesis have done is they’ve really compressed that time frame. They’ve gone from just economy vehicles to competitive vehicles to competitive luxury in a really relatively fast amount of time,” Fisher said.
Sales of Hyundai and Kia vehicles increased about 61% from 2010 to more than 1.4 million vehicles in the United States 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 EV sales. LMC forecasts Hyundai’s all-electric vehicle sales are expected to account for 9.2 percent of the U.S. EV market this year. While sales are expected to increase, that percentage is seen as the company’s peak until at least 2024 or 2025, when the new plant in Georgia is expected to go online.
Hyundai’s output, which places it among the top five in the world, remains below 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 United States, our plan is to grow,” Randy Parker, CEO of Hyundai Motor America, told CNBC earlier this month. “It all boils down to capacity which will determine how much we can grow.”