Hyundai’s best years in the US are set to be tested by the Inflation Act

Drew Angerer | Getty Images News | Getty Images

Savannah, JA. – Hyundai Motor Group Her best years ever in the United States

The South Korean automaker has made the transition from bargain economy cars and hamster dancing to competing against massive automakers in the highly profitable US market.

The Hyundai, Kia and Genesis brands are expected to capture nearly 11% of the US new car market this year — marking the highest level since the automaker entered the country in 1986. It is also set to be among The best-selling electric vehicle this year is a year, only plus Tesla during the third quarter.

But whether the world’s fourth-largest automaker by sales last year can continue this profitable streak, especially in electric vehicles, is in question. In August, Hyundai buyers lost the federal tax credits associated with buying an electric car due to program changes under the Biden administration’s inflation-reduction law.

Domestic automakers, including Hyundai’s closest competitor in electric vehicles – TeslaAnd the Ford Motor And the general motors Still eligible for credit. All of Hyundai’s electric cars are currently imported into the United States, though it produces several gas-powered models at plants in Alabama and Georgia.

Hyundai Motor CEO Jihoon “Jay” Chang, in an exclusive interview with CNBC, called the loss of incentives a concern and a “very difficult problem.” But he said he believes the automaker can continue its long-term growth in the US, despite the near-term hiccups.

“IRA, in the short term, gives us some constraints on customer selection,” Zhang told CNBC last month as the company celebrated the launch of a new $5.5 billion electric vehicle and battery plant in Georgia. “Longer 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 and headquartered in Seoul, South Korea but operate separately in the United States.

Sailing in an IRA

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

Chang said Hyundai is working closely with government officials in the United States and South Korea to change regulations or secure an exemption for the auto industry. US officials confirmed that such discussions are ongoing, including a meeting last week between US Trade Representative Catherine Tae and South Korean Trade Minister Ahn Dok-gun.

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

Hyundai executives and government officials take the road in front of the automaker’s new “Metaplant America” ​​vehicle in Bryan County, Georgia, on Tuesday, October 25, 2022.

CNBC | Michael Weiland

The executives also point out that the United States and South Korea have a vehicle tariff-free deal. (Cars built in Mexico and Canada are still eligible for credits.)

Jose Munoz, Hyundai Motor Company’s global president and chief operating officer, declined to disclose the specific financial impact associated with the loss of credits, but called it a major blow to the automaker’s bottom line.

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

Executives said the new Georgia plant, announced months before the IRA passed, is the culmination of growth for Hyundai in the U.S. Whether or not they credit the progress to a structured, decades-long approach to improvement and a decisive strategy for everything-in-its-new products. In the last years.

“We’re trying to do everything we can do, but honestly, it’s always a challenge, being an innovative disruptive kind of thing. But I think for now, I hope we’re on the right track to respond to customer needs,” Zhang said. “We like to be different.”

“different” products

Look no further than the company’s new Hyundai vehicles for proof that they’re “different.” The automaker’s futuristic-looking Kia EV6 and Hyundai Ioniq 5 look ready to launch into space.

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

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

Scott Mill | CNBC

The 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.

Attracting wealthier, younger, and more educated clients, the Telluride Center said, are all conquests. This is a real game-changer,” he said, referring to SUVs and electric cars as Kia’s “golden cycles.” “We are looking for more, and we will grow as fast as we can.”

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 ratings by Consumer Reports, JD Power, and others. At last week’s Los Angeles Auto Show, Genesis won kudos with its new convertible concept car, and the G90 sedan was named 2023 Motor Trend Car of the Year.

EV Genesis X Convertible Concept

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“The design language was the big differentiator for us,” Chang said. “We will let the designer go free.”

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

Hyundai Rise

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

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

Japan-based Toyota has spent decades building sales in the United States, entering the US auto industry with small cars in 1957 and achieving 10.4% market share in the US in 2002, according to public filings. It is now the largest automaker in the world by sales as of recent years.

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

“I think what Hyundai and Kia and Genesis have done is they’ve really squeezed that time frame in. They’ve gone from just low-cost cars to competitive cars to competitive luxury cars in a very relatively quick time frame,” Fisher said.

Sales of Hyundai and Kia vehicles are up nearly 61% since 2010 to more than 1.4 million vehicles in the United States last year. Despite the expected decline 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. LMC expects Hyundai’s sales of all electric vehicles to account for 9.2% of the electric vehicle market in the United States this year. While sales are expected to grow, that percentage is seen as a peak for the company until at least 2024 or 2025, when the new Georgia plant is set to come online.

Hyundai’s production, which puts it in the top five in the world, is still 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 existing US 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 CNBC earlier this month. “It’s all about capacity that will determine how much we can grow.”

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