Negotiations between Hyundai Motor and the U.S. government concerning tax incentives for the Korean automaker’s USD 5.5 billion EV plant in Georgia have yet to reach a conclusion.

It was first reported on August 31st 2023, indicating that Hyundai Motor Group and LG Energy Solution (LGES) would invest an additional USD 2 billion in their battery cell manufacturing joint venture (JV) at the Metaplant in Bryan County, Georgia.

The company subsequently aimed to expedite the construction of its factory in Georgia and establish partnerships with local battery suppliers to align with the Inflation Reduction Act (IRA), as stated by Hyundai’s CFO Seo Gang-Hyun during an earnings call.

In an latter interview, Georgia Governor Brian Kemp expressed concerns that the IRA is adversely affecting Korean companies. Korea Joongang Daily further noted that no Korean electric vehicles, including those from Hyundai Motor and Kia, are currently listed for the IRA tax credit. According to TrendForce’s analyst, the market share in 2023 for Hyundai Motor and Kia combined is 10.6%, which ranks as 4th in the US market, behind GM, Toyota, and Ford.

Currently, the U.S. Energy Department has reportedly yet provided a definitive response to Hyundai’s request for a 30 percent tax credit under the IRA, as per a report from the Korean media outlet Korea Joongang Daily. As reported by The Korea Daily, the potential value of these incentives could be around USD 350 million.

“We’ve been constantly discussing with the U.S. government for the incentives,” Hyundai Motor confirmed regarding the news. “Nothing has been decided, and we’re waiting for the result.” Still, reportedly, Hyundai and Kia have not announced any cuts to EV production or investment.

TrendForce notes that the automotive industry is currently facing high raw material and labor costs, as well as significant investments in electrification and autonomous driving. Balancing the protection of local enterprises, maintaining competitiveness, and managing consumer costs is an urgent task for governments worldwide. Most countries are focusing on the country of origin rather than the brand of vehicles in their restrictive measures.

Measures taken by the US—specifically for EVs—include requiring that EVs and their batteries be assembled in North America. Furthermore, critical minerals in the batteries must originate from countries that have signed free trade agreements with the US to qualify for subsidies totaling US$7,500.

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• [Insights] Hyundai Defies Headwinds with 1.52 Billion Groundbreaking for Electric Vehicle Plant

(Photo credit: Hyundai)

In May 2023, Hyundai announced a local investment of KRW 2 trillion (approximately USD 1.52 billion) to establish an EV factory in South Korea, with a groundbreaking ceremony held on November 13. The factory is expected to be completed in 2025, with electric vehicle production set to commence in the first quarter of 2026.

The initial production capacity is planned at 200,000 vehicles per year, focusing on electric SUVs under Hyundai’s premium brand, Genesis.

TrendForce’s Insights:

1. IONIQ 5’s High Cost-Performance Welcomed in the North American Market, Serving as a Pillar for Hyundai’s Electric Vehicle Endeavors

The IONIQ 5, built on Hyundai’s E-GMP platform, boasts an 800V charging infrastructure and a 3.5-second acceleration from 0 to 100 km/h, all priced around USD 40,000. In comparison to other 800V competitors in the North American market, such as the Audi e-tron GT, Lucid Air, and Taycan, which are priced at approximately USD 80,000 to 100,000, the IONIQ 5 stands out with competitive features.

South Korea demonstrates a significant level of self-sufficiency in the strategic components of electric vehicles. Battery suppliers Samsung SDI and LG Energy Solution (LGES) rank among the world’s top ten battery suppliers.

Additionally, Hyundai Mobis stands as South Korea’s largest automotive parts supplier, offering a comprehensive product line that includes various components in electric motors and controls. With robust support from a powerful supply chain, this enhances Hyundai’s market competitiveness.

According to Hyundai North America’s reported sales figures for August 2023, the IONIQ 5 and IONIQ 6, both built on the E-GMP platform, collectively sold 5,235 units in the North American market. This reflects a remarkable 245% growth compared to the same period in 2022.

The year-to-date total sales of the IONIQ 5 and 6 reached 28,000 units by August, showing a notable 63% growth compared to the same period last year. It’s noteworthy that these achievements were made without the benefit of the USD 7,500 subsidy under the “Inflation Reduction Act.”

The success of the IONIQ series has bolstered Hyundai’s confidence in making this platform a core element, facilitating the development of related models and further investments in the electric vehicle business.

2. IONIQ Temporarily Pauses Entry into Chinese Market Amidst Intense Homogeneous Product Competition

With the rise of local Chinese automotive brands and the trend toward electrification, Hyundai’s sales in the Chinese market have plummeted from 1.14 million vehicles in 2016 to 250,000 vehicles in 2022, as per data released by the China Association of Automobile Manufacturers.

In 2021, Hyundai sold its first factory in Shunyi to Li Auto, and in June 2023, Hyundai announced plans to sell two more of its remaining four plants.

In the electric vehicle sector, the IONIQ 5 is built on an all-new electric vehicle platform, outperforming earlier models based on oil-to-electric conversion platforms in both overall efficiency and performance. With its affordable price, it presents a formidable challenge to equivalent models in Europe and the United States.

However, given China’s early development of new energy vehicle platforms and the completion of pure electric vehicle platforms by many domestic manufacturers, coupled with highly autonomous supply chains, IONIQ does not enjoy overwhelming advantages in China. Therefore, the initial focus on the European and American markets is a strategically sound decision.

As European and American automakers continue to establish pure electric vehicle platforms and competitors like Audi and Stellantis strengthen their technological exchanges with Chinese manufacturers, the advantages of the E-GMP platform will face challenges. To further enhance the economic scale of their products, the Chinese market remains a crucial challenge that Hyundai cannot ignore.

Under strong government support, South Korean automakers are making remarkable strides in the global automotive market. Hyundai Motor, the largest car manufacturer in South Korea, reported a significant surge in its third-quarter operating profit, doubling year-on-year, primarily fueled by the robust sales of high-profit SUVs and EVs.

According to reports from news outlets such as Yonhap News Agency, Hyundai Motor announced its financial results on October 26, 2023. In the third quarter of 2023, the company witnessed an 8.7% year-on-year increase in revenue, reaching 41 trillion Korean won. Furthermore, the operating profit soared to 3.8 trillion Korean won (approximately 2.8 billion USD), marking a remarkable 146.3% increase compared to the same period last year. These results exceeded market expectations of 3.62 trillion Korean won and set a historic high for the same period.

In the midst of a semiconductor industry downturn, long-standing economic leader Samsung Electronics has faced operational setbacks. In contrast, Hyundai Motor has thrived as South Korean automakers dominate the global automotive market, securing its position as South Korea’s most profitable company for three consecutive quarters and causing a shift in rankings.

In terms of sales volume, Hyundai Motor sold 1.05 million vehicles globally in the third quarter, marking a 2% year-on-year growth. Notably, the company’s focus on expanding its EV product lineup, including the introduction of the IONIQ, resulted in a significant 33.3% increase in global sales of eco-friendly vehicles, reaching 169,000 units.

The luxury brand under Hyundai Motor, Genesis, achieved a 5.1% share of total sales in the third quarter, an increase from 4.9% in the same period last year. SUVs, known for their profitability, accounted for 54.7% of total sales in the third quarter (excluding Genesis), up from 50.6% in the previous year. When including Genesis SUV models, this figure rises to 57.8%.

Amid growing tensions in the Middle East and globally sustained high-interest rates, notable figures like Elon Musk of Tesla and giants like General Motors have warned of potential weak consumer demand for EVs in 2024. Nevertheless, Hyundai Motor’s Vice President, Seo Gang-hyun, has affirmed that the company’s $5 billion investment plan to establish a factory in Georgia is proceeding as planned and is set to commence production in the first half of 2024, six months ahead of the initial schedule.

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• [News] Ford Shifts EV Investment Focus Amidst Fierce Price Competition
• [News] Volkswagen Group Reports Strong 45% Growth in EV Sales for the First Three Quarters of 2023

(Image credit: Hyundai’s Facebook)

Infineon, Hyundai, and Kia announced on October 18 that they have signed a multi-year agreement for the supply of SiC (Silicon Carbide) and Si (Silicon) power semiconductor modules and chips.

Under this agreement, Infineon will supply SiC and Si power components to Hyundai and Kia until 2030, and in return, Hyundai and Kia will support Infineon’s production capacity and reserves.

The demand for SiC power devices has surged with the growing popularity of new energy vehicles, and as a prominent industry leader, Infineon has embarked on numerous collaborations this year.

• Infineon and Resonac

In January, Infineon declared a new multi-year supply and cooperation agreement with Resonac Co., Ltd. (formerly Showa Denko K.K.). According to this agreement, Resonac will provide Infineon with SiC materials for producing SiC semiconductor components, including 6-inch and 8-inch wafers. Initially focused on 6-inch wafers, Resonac will later supply 8-inch SiC wafers to support Infineon’s transition to 8-inch wafers. As part of the agreement, Infineon will also provide Resonac with SiC material technology-related intellectual property.

• Infineon and TanKeBlue, SICC

In May, Infineon signed long-term agreements with TanKeBlue and SICC to ensure a more competitive and substantial supply of silicon carbide materials. These two suppliers will primarily provide Infineon with 6-inch silicon carbide substrates and offer 8-inch silicon carbide materials, aiding Infineon in transitioning to 8-inch SiC wafers. The agreements also encompass silicon carbide ingots, as Infineon had previously invested nearly 1 billion RMB in acquiring a laser-based wafer technology enterprise, aiming to enhance the utilization of silicon carbide substrates and device cost competitiveness.

Notably, both TanKeBlue and SICC will account for a double-digit percentage of Infineon’s long-term demand volume.

• Infineon and Foxconn

In the same month, according to the Foxconn’s official website, Infineon and Foxconn have signed a memorandum of cooperation to establish a long-term partnership in the field of electric vehicles. Under this agreement, the two companies will focus on the adoption of silicon carbide technology in high-power applications for electric vehicles, such as traction inverters, on-board chargers, and DC converters. They also plan to jointly establish a system application center in Taiwan to expand their collaboration further.

• Infineon and Schweizer Electronic

Additionally, Infineon is collaborating with Schweizer Electronic to develop an innovative solution aimed at directly embedding Infineon’s 1200V CoolSiC™ chips into PCB boards. This move seeks to significantly enhance the driving range of electric vehicles while reducing the overall system cost.

• Infineon and Infypower

In September, Infineon announced a partnership with Shenzhen Infypower (INFY) to provide the industry-leading 1200V CoolSiC™ MOSFET power semiconductor devices, boosting the efficiency of electric vehicle charging stations.

In line with their goal of capturing a 30% share of the global SiC market by 2030, Infineon revealed plans to invest up to 5 billion euros over the next five years to construct the world’s largest 8-inch SiC power semiconductor facility in Malaysia.

(Photo credit: Infineon)

Due to the Russian-Ukrainian war, automotive factories currently located in Russia have shut down successively and stopped importing vehicles, TrendForce asserts. In addition, Russia has stated that if foreign-funded enterprises choose to permanently suspend business or withdraw from the market during this period, the Russian government will nationalize their business assets. Most automotive brands have factories in Russia and now face the dual pressures of international public opinion and corporate losses. According to TrendForce investigations, after Renault-Nissan acquired the Russian brand LADA, its market share reached 32%, making it the largest automotive brand in Russia followed by Hyundai-Kia at 23% and Volkswagen at 12%.

According to TrendForce, since Renault is the largest shareholder of local automaker AVTOVAZ and Russia is the company’s second largest market, whether AVTOVAZ is nationalized or sales are lost, the overall impact on Renault cannot be underestimated. In addition, even if production can continue, the depreciation of the ruble will greatly increase the cost of importing components.

Soaring costs not conducive to automotive industry recovery

The large number of components and the long supply chain inherent in the automotive industry makes mitigating geopolitical risk difficult. Almost all international or regional events will affect the normal operation of this industry. The Russian-Ukrainian war will not only affect automaker assets, supply chains, sales, and revenue in Russia and around the world in the short term but, in the long term, geopolitics will influence business planning, competiveness, and technology options. More broadly, geopolitical and economic conflicts are derailing automakers’ plans to recover from the pandemic and chip shortages.

According to TrendForce, there are three major factors impeding the recovery of the automotive industry and these factors will further affect automobile sales in 2022. First, the production of vehicle components in Ukraine has halted, affecting the production of complete vehicles. Volkswagen indicated that it intends to move production capacity to North America and China due to the shortage of vehicle wiring harnesses. Second, Russia produces various upstream raw materials such as nickel and palladium for vehicle manufacturing. Due to supply constraints, various costs have risen sharply and some car manufacturers have begun to increase the price of complete vehicles. Third, inflationary pressures have risen sharply, leading to rising costs of living and a reduction of consumer spending power.