'Record-Breaking Performance' Hyundai Motor and Kia Face Off Directly with Tesla in the US

Hyundai Motor Company and Kia, which surpassed Tesla's profitability last year with record-breaking performance, have announced a direct confrontation with Tesla in the U.S. electric vehicle market this year. Their strategy is to increase local production to secure U.S. government EV subsidies and to launch low-priced electric vehicles ahead of Tesla.

According to WardsAuto on the 26th, Hyundai Motor Company and Kia (including Genesis) sold 94,044 electric vehicles in the U.S. market last year, marking a growth of over 60% compared to the previous year. In terms of market share (8.4%), they ranked second after Tesla (55%). They outpaced strong competitors such as General Motors (GM), Ford, and Volkswagen Group by more than 20,000 units.

Last year, the U.S. electric vehicle market was truly a "tilted playing field" for foreign automakers. Due to the implementation of the Inflation Reduction Act (IRA), electric vehicles not finally assembled in North America were ineligible for subsidies of up to $7,500 (approximately 10 million KRW). This meant that they had to be sold emphasizing only product competitiveness despite being 10 million KRW more expensive.

Recently, Hyundai Motor Company and Kia have been sweeping awards at major automotive ceremonies including those in North America, gaining recognition for their product competitiveness in the global market. Hyundai won the World Car of the Year (WCOTY) award for two consecutive years (2022?2023) with the Ioniq 5 and Ioniq 6, while Kia’s EV6 and EV9 were selected as the North American Car of the Year (NACOTY) in 2023 and 2024, respectively.

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Having enhanced their product capabilities, Hyundai Motor Company and Kia are now focusing on securing price competitiveness. Recently, while demand for electric vehicles has decreased, Tesla has implemented comprehensive price reduction policies mainly in the North American, European, and Chinese markets, making price the most critical factor in EV sales.

Hyundai Motor Company and Kia will begin operating their dedicated EV plant, Meta Plant America (HMGMA), in the second half of this year. Additionally, Kia will start producing its flagship electric sports utility vehicle (SUV), the EV9, at its Georgia plant in the U.S. from the second quarter. This move aims to expedite local production to meet the U.S. government’s EV subsidy requirements. Securing price competitiveness worth approximately 10 million KRW per vehicle will enable aggressive market share expansion.

They will also launch low-priced compact and subcompact electric vehicles ahead of competitors like Tesla. Around June, Kia plans to release the small electric SUV EV3 to the global market. Following this, they will consecutively introduce volume models such as the small electric sedan EV4 and higher trims of the EV5, which was introduced in China last year.

On the other hand, Tesla is expected to start production of a new electric vehicle priced in the 30 million KRW range in the second half of next year. During the earnings conference call on the 24th (local time), Tesla CEO Elon Musk revealed that development of the next-generation low-priced vehicle has progressed significantly and production is planned at the Texas factory in the second half of next year.

Hyundai Motor Group, preparing to launch the Kia EV3 around June this year, will thus introduce a low-priced model about a year earlier than Tesla. Furthermore, Hyundai Motor Company and Kia are exploring various ways to supply low-priced electric vehicles to consumers without sacrificing profitability. They are responding not only by reducing the intrinsic cost of electric vehicles but also by increasing sales of hybrid electric vehicles (HEVs). This approach improves profitability through adjustments in their diverse eco-friendly vehicle portfolio. Recently, Kia’s HEV sales operating profit margin has risen to double digits, and EV profitability has also increased to the mid-single digits (4?6%).

Joo Woo-jung, Vice President and Head of Finance at Kia, stated during the earnings outlook conference call, "We are making our best efforts with technology-based differentiation and cost competitiveness as our top priorities," adding, "Starting with the EV3 in June this year, we will gradually show the results of our efforts."

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