Hyundai Motor Group will make a large-scale facility investment to strengthen its position in the US, a major market for eco-friendly vehicles, a major new business material. It is a decision to respond to the US administration’s local manufacturing revitalization policy and at the same time strengthen product competitiveness.
After holding a press briefing at the Grand Hyatt Hotel in Yongsan-gu, Seoul on the 22nd of last month, Hyundai Motor Group Chairman Chung Eui-sun said that he would invest $5.5 billion (about 7 trillion won) by 2025 in mobility-related fields such as US robotics, urban aviation (UAM), and autonomous driving. said. Chairman Jung did not disclose a specific fund execution plan that day. However, it is expected to invest in the direction of fostering the industrial ecosystem, such as expanding the infrastructure of each new business field or making strategic investments in related companies.
The previous day, Hyundai Motor Group announced a plan to invest $5 billion (about 6.4 trillion won) to build a battery cell production plant in Georgia, the US, in a joint venture with an electric vehicle production plant. As products are released from each plant, it is expected that positive public opinion will be formed in the local area and performance will be increased by quickly meeting customer requirements. Hyundai Motor Group has announced plans to invest more than $10 billion in the US over two days.
The reason behind the Hyundai Group’s decision to make a large-scale investment in the US lies in the local manufacturing support measures introduced by the current US administration. In order to overcome the global supply chain crisis, the US government is inducing private investment by providing various incentives to locally produced products.
Early last year, shortly after Biden took office, he signed an executive order requiring the federal government to use only locally-produced products. Accordingly, the federal government is currently tolerant of only products in which locally-produced parts make up 55% of the total composition. The ratio will be raised to 60% after October, and will increase to 65% next year and 75% in 2029.
Procurement market and subsidy policy incentives for local production
The reason why Hyundai Motor Group, a private company, should focus on the US procurement market can be found in the huge market size. According to the Korea Trade-Investment Promotion Agency (KOTRA), the size of the US procurement market reached US$600 billion (about 660 trillion won) as of 2020. Of these, the size of the local government car market alone is said to have reached $20 billion (about 22.11 trillion won) as of the beginning of last year.
Targeting the large-scale government car market is important in that it can not only meet the demand, but also have an impact on private demand. According to KOTRA, quality assurance and sales price of products distributed in the US procurement market are determined based on the specifications and market price of the private market.
Bae Seong-bong, Chicago Trade Officer at KOTRA, said, “If the U.S. government’s regulations on the proportion of local parts in the procurement market are strengthened, the preference for sourcing local products will intensify throughout the U.S. industry. It seems that it will not be possible to be free from industrial regulations in the country.”
The fact that the purchase subsidy for electric vehicles is mainly paid for locally produced products is another factor that induces automakers to invest in facilities. The US administration will provide an additional subsidy of $500 for electric vehicles with more than 50% of locally-produced parts installed. An additional $4,500 will be provided for electric vehicles manufactured in factories where UAW members work. Hyundai Motor Group is in a situation where it must establish local production facilities in order to more actively create demand for electric vehicles in the United States.
For the Hyundai Motor Group, which has taken eco-friendly cars as a new food, the US is a ‘bondage’ eco-friendly car market that cannot be missed. The U.S. was the third largest market in the world based on the volume of new car sales last year. In addition, the local government has set a goal to fill half of new vehicles with only eco-friendly vehicles such as pure electric vehicles (BEVs) and hydrogen electric vehicles (FCEVs) by 2030. This is why Hyundai Motor Group is actively investing in the new economic policy of the United States as an opportunity.
Hyundai Motor Group said, “Investment in the US is a strategic decision to respond to the US government’s high-strength Buy American policy. do,” he explained.
Meanwhile, as Hyundai Motor Group announced its domestic investment plan at the same time, it expressed its will to maintain a business balance to the market. Hyundai Motor Group announced on the 18th of last month that it will invest 21 trillion won in domestic electric vehicle development and production and charging infrastructure. It is analyzed that the intention is to increase competitiveness by investing in domestic and foreign industries and to create favorable public opinion in each market.
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