"Hyundai·Kia Electric Vehicles to Increase US Production" IRA Response Scenario

US Alabama and Georgia Plants Expected to Produce Dedicated Electric Vehicles
Avoiding Price Wars with Lower Prices... Possibility of IRA Application Delay

Hyundai Motor Alabama Plant Final Assembly Line

[Asia Economy Reporter Choi Dae-yeol] The blueprint for Hyundai Motor Group's entry into the U.S. electric vehicle market is taking shape. While pursuing a waiver from the Inflation Reduction Act (IRA), which will significantly impact local electric vehicle sales, it has been reported that the group plans to diversify the electric vehicle models produced at existing plants until a new dedicated EV factory is built.

According to industry sources on the 13th, Kia is reviewing specific timing, models, and volumes to produce electric vehicles at its Georgia plant in the U.S. Yoo Ji-woong, a researcher at Daol Investment & Securities, stated in a recent report, "The currently operating Alabama (Hyundai) and Georgia (Kia) plants will each mass-produce electric vehicle (EV) lineups separately from the new factory," and "In the long term, it is expected that production capacity will be secured to mass-produce at least 200,000 EVs annually at the two plants."

Researcher Yoo predicted that from the second half of next year, a dedicated EV production system will be established in the U.S. to meet local demand. The models initially involved are the Ioniq 5 and 6 (Hyundai), and Kia EV6 and EV9. Including the recently decided dedicated EV factory, from 2025, Genesis electric vehicles, the electric sports utility vehicle (SUV) Ioniq 5, and electrified pickup truck models will also join the lineup.

Hyundai Motor Group Chairman Chung Euisun, company executives, and officials from the Georgia state government in the United States are shoveling dirt at the groundbreaking ceremony for the electric vehicle-only plant held in late last month.

Earlier, Hyundai Motor's Alabama plant in the U.S. modified some equipment this year to enable electric vehicle production. The GV70, Genesis's first overseas production volume and the first mass-produced electric vehicle in the U.S., will be unveiled for the first time at the LA Auto Show held in mid-month.

The key issue is the operating rate of existing plants. This is because converting the currently operating internal combustion engine lines will inevitably cause some production downtime. An industry insider familiar with the automotive sector said, "Since Hyundai and Kia currently have a significant amount of undelivered inventory in the U.S., it is not easy to stop the plants and switch equipment."

In this case, it seems possible to respond by increasing exports from Hyundai Motor Group's complete vehicle plants in Korea or Mexico to the U.S. Since almost all dedicated EV volumes are currently produced at domestic plants, coordination with labor unions is also necessary. Volume transfers require labor-management agreement.

Exclusive electric vehicle EV6 produced at Kia Hwaseong Plant

Hyundai Motor Group has decided to avoid price-cutting competition that sacrifices profitability as much as possible. The 2023 model year Kia EV6 eliminated the lowest trim and raised the price by $1,000. If purchasing the cheapest model, consumers will bear a cost of $7,100 (about 9.7 million KRW), and if tax credits under the Inflation Reduction Act are not applied, they will have to pay $14,600 (about 20 million KRW) more than previous buyers.

Earlier, the Ioniq 5 also saw a $1,500 (about 2 million KRW) price increase with the model year change. The soon-to-be-released GV70 electrified model is expected by the industry to start around $65,000, with higher trims reaching the mid-$80,000 range. Vehicles priced over $80,000 are excluded from tax credits under the Inflation Reduction Act.

Currently, attention is focused on how the U.S. government will reflect opinions received from major countries and companies regarding the Inflation Reduction Act. Korea, Japan, and Europe argue that the origin-based discrimination stipulated in the IRA violates Free Trade Agreements (FTA). Hyundai recently proposed in a letter to the U.S. government that "electric vehicles manufactured by corporations that made binding commitments to build U.S. EV plants before the law's enactment should be considered as meeting North American assembly requirements or be granted a grace period."

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