[Jeong Eui-sun's 2nd Year③] Overwhelming Achievements... Overcoming IRA Is an Immediate Challenge

Focusing on Overcoming Inflation Reduction Act in the Electric Vehicle Era
Chairman Jeong on Consecutive Two-Month US Trips... Struggling to Find Solutions

Editor's Note"I will make Hyundai Motor a world-class company." (March 1999, Chung Mong-koo, Chairman of Hyundai Motor Board of Directors, inauguration)

"We aim to be a beloved company that realizes humanity's dreams together and shares the fruits with customers worldwide." (October 2020, Euisun Chung, Chairman of Hyundai Motor Group inauguration)

Euisun Chung, Chairman of Hyundai Motor Group, marks his second year in office on the 14th. Although Chairman Chung joined the company early and took on various roles related to automobiles, the reality he faced upon his inauguration was completely different from the past. While Chung Ju-yung, founder of Hyundai Group, and Chung Mong-koo, Honorary Chairman of Hyundai Motor Group, laid the foundation to establish the name "Hyundai" in the global finished car market, which had been built over a century mainly by leading advanced country companies, Chairman Euisun Chung inherited this and was tasked with navigating the industry’s period of upheaval. It is for this reason that he is seen not only to refine what has been done well so far but also to attempt unprecedented initiatives and gain market recognition. Now, two years later, we review the achievements Chairman Chung has made and examine the remaining challenges.

Hyundai Motor Group Chairman Chung Eui-sun is taking a commemorative photo in front of a large poster of the Newsweek special issue cover after receiving the "Visionary of the Year" award at the 'The World’s Greatest Auto Disruptors 2022' ceremony held at the World Trade Center in New York, USA, in April this year.

[Asia Economy Reporter Kiho Sung] Approaching his 2nd anniversary, Euisun Chung, Chairman of Hyundai Motor Group, has achieved remarkable results such as entering the global top 3 manufacturers, but numerous challenges remain to be addressed. Following the semiconductor supply shortage, the U.S. Inflation Reduction Act (IRA) has emerged as a new challenge in the electric vehicle sector, which had been steadily growing. Since governance reform has yet to be resolved, industry attention is focused on Chairman Chung’s decisions.

The most urgent issue is the Inflation Reduction Act. This is because the announcement of the enforcement decree is less than two months away. The IRA primarily provides tax benefits only for eco-friendly vehicles produced in North America. If the U.S. implements this law as scheduled from next year, Korean-made eco-friendly vehicles will be excluded from subsidy benefits. The IRA covers conventional electric vehicles (EV), hydrogen fuel cell electric vehicles (FCEV), and plug-in hybrids (PHEV).

The impact of the IRA has already begun. Hyundai Motor ranked second in the local market in the first half of this year after Tesla but dropped to fourth in July and fifth in August. Especially, consumers who signed contracts after August 17 are not eligible for tax benefits, so sales are expected to sharply decline from the end of this year when the law is fully applied.

Currently, Hyundai Motor Group produces all eco-friendly vehicles domestically for export. Although it plans to build a dedicated electric vehicle factory in Georgia, USA by 2025, the problem is that subsidies will not be available until that year.

U.S. President Joe Biden (left) and Hyundai Motor Group Chairman Chung Eui-sun during Biden's visit to Korea last May. [Image source=Yonhap News]

The government and industry are scrambling to find solutions, but untangling the situation is difficult. Chairman Chung personally visited New York and Georgia in the U.S. last August to seek countermeasures. Last month, he also made consecutive business trips to the U.S., visiting Hyundai Motor’s sales corporation in LA to check the local situation. It is widely believed that these visits were mainly to discuss sales strategies in response to the urgent IRA issue.

Governance restructuring is also an immediate task. Hyundai Motor Group is the only one among Korea’s top 10 conglomerates that has not eliminated circular shareholding. Previously, Hyundai Motor Group attempted governance restructuring in 2018 but failed. They tried to simplify governance by splitting Hyundai Mobis and merging it with Hyundai Glovis, but withdrew due to growing controversy over Hyundai Mobis’s undervaluation.

Jinwoo Kim, a researcher at Korea Investment & Securities, said, "Typically, governance restructuring accompanies business restructuring to maximize justification and effect. Recent cash and in-kind contributions by Hyundai Mobis are changing the traditional formula of governance restructuring and increasing available options."

This content was produced with the assistance of AI translation services.