Hyundai Motor has found itself on the edge of a precipice as none of its eco-friendly vehicles were placed on Joe Biden’s “Made-in-America” electric vehicle (EV) subsidy list.
This will likely put the brakes on the Korean automaker’s expansion of its share in the U.S. EV market as it does not have any EV-dedicated factories in the United States — the first of which is scheduled for 2025.
The U.S. government released a list of 21 models that will qualify for its credit in the second half, under a new rule that is part of its Inflation Reduction Act, and neither the pure EVs nor the plug-in hybrids from Hyundai Motor or Kia made the list, including the bestsellers Ioniq 5 and EV6.
This makes Hyundai and Kia one of the very few companies ineligible for subsidies in the United States. German automakers like Audi, Mercedes-Benz and BMW each have at least one model on the list.
Tesla and General Motors were also excluded, but only because the two companies already sold more than 200,000 units in the U.S. market. They will be added to the list starting on Jan. 1.
This means customers must pay $7,500 more than on the 21 other models to buy a Hyundai EV. The Ioniq 5 costs around $40,000 in the U.S. market, around $3,700 cheaper than Ford’s Mustang Mach-E, including the government subsidy. But since the Mach-E is qualified for the credit and Ioniq is not, the Ford car will now be some $3,400 cheaper than Ioniq 5.
“Hyundai’s Ioniq 5 and Kia’s EV6 were always around $10,000 cheaper than similar-size EVs from other brands,” said Lee Hang-gu, a senior analyst at Korea Automotive Technology Institute. “But without the price advantage, the sales will likely decrease by 1,000 units per week.”
“Hyundai has no choice but to start the production of its EVs in the United States as soon as possible,” said Lee.
Hyundai said it is currently discussing moving up the construction schedule of its Georgia plant by six months. It hopes to break ground in October this year so that it can start mass production by at least October 2024. The initial plan was to start production in 2025.
The carmaker also invested $300 million in its Alabama plant, which makes combustion engine cars, to update the existing assembly line to produce EVs there as well. Production of the Santa Fe Hybrid will begin in October and the Electrified GV70 from December.
“What Hyundai and Kia have to do at the moment is to shift its combustion engine vehicle production facilities in Alabama and Georgia to EVs, so that they can produce Ioniq 5s and EV6s there, the two models that account for the vast majority of their sales in the United States,” Kim Pil-soo, an automotive engineering professor at Daelim University, who also serves as the chairperson of the Korea Electric Vehicle Association, said.
Hyundai Motor sold a total of 18,328 EVs in the U.S. market this year as of the end of July, up 176.2 percent on year. Of them, the Ioniq 5 made up 85 percent. Kia’s EV sales soared 472 percent to 21,156 units, of which 68 percent are EV6s.
The combined market share of Hyundai and Kia stood at 9 percent, now No. 2 after Tesla.
Hyundai Motor Group Executive Chair Euisun Chung and President Gong Young-woon left for the United States on Tuesday, reportedly to respond to the U.S. government’s EV credit rule.
The Korea Auto Industries Cooperative Association (Kaica) also sent a letter to the U.S. government, demanding a revision of the law so that it can include EVs from Korean manufacturers.
The Korean government spent a total of 82.2 billion won ($61.1 million) on imported brands’ EV subsidies in the first half, and about 54 percent were given to customers that bought U.S. automakers, Tesla and General Motors, according to data from Kaica.
BY SARAH CHEA [chea.sarah@joongang.co.kr]
