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Hyundai’s best years in the U.S. face test from Biden Inflation Reduction Act

Drew Angerer | Getty Images News | Getty Images

SAVANNAH, Ga. — Hyundai Motor Group is having its best years ever in the U.S.

The South Korean automaker has successfully moved from bargain economy vehicles and dancing hamsters to competing against formidable automakers in the highly profitable American market.

The company’s Hyundai, Kia and Genesis brands are expected to capture nearly 11% of the U.S. new vehicle market this year — marking its highest level since the automaker entered the country in 1986. It’s also set to be among the top sellers of electric vehicles this year, trailing only Tesla through the third quarter.

But whether the world’s fourth-largest automaker by sales last year can continue that winning streak, especially in EVs, is in question. In August, Hyundai buyers lost federal tax credits associated with purchasing an electric vehicle due to changes in the program under the Biden administration’s Inflation Reduction Act.

Domestic automakers, including Hyundai’s closest competitors in EVs — Tesla, Ford Motor and General Motors — still qualify for the credit. All of Hyundai’s electric vehicles are currently imported to the U.S., though it produces several gas-powered models at plants in Alabama and Georgia.

Hyundai Motor Co. CEO Jaehoon “Jay” Chang, in an exclusive interview with CNBC, described the loss of incentives as concerning and a “very challenging issue.” But he said he believes the automaker can continue its long-term growth in the U.S., despite the near-term hiccup.

“IRA, short term, it gives us some limitation on the customers’ choice,” Chang told CNBC last month as the company celebrated the groundbreaking of a new $5.5 billion electric vehicle and battery plant in Georgia. “For the long term … we have a very solid plan. … I think we can be competitive.”

Hyundai, including Genesis, and Kia are owned by the same Seoul, South Korea-based parent company but largely operate separately in the U.S.

Navigating IRA

Hyundai, Kia and other non-domestic automakers have been vocal opponents of the new electric vehicle tax credit regulations under the IRA. The law, passed by Congress in August, immediately eliminated a tax credit of up to $7,500 for plug-in hybrid and electric vehicles that are imported from outside North America and sold in the U.S.

Hyundai is working closely with public officials in the U.S. and South Korea to change the regulations or secure the automaker an exemption, Chang said. U.S. officials confirmed such discussions are ongoing, including a meeting last week between U.S. Trade Representative Katherine Tai and South Korea’s Minister for Trade, Ahn Dukgeun.

Hyundai argues its investment in Georgia — the largest economic development project in that state’s history — should count for something in the way of an IRA revision.

Hyundai executives and government officials break ground on the automaker’s new “Metaplant America” in Bryan County, Georgia, on Tues., Oct. 25, 2022.

CNBC | Michael Wayland

Executives also note the U.S. and South Korea have a tariff-free deal in place for vehicles. (Vehicles built in Mexico and Canada still qualify for the credits.)

Jose Munoz, Hyundai Motor global president and chief operating officer, has declined to disclose a specific financial impact associated with losing the credits, but described it as a huge blow to the automaker’s bottom line.

Steven Center, Kia America’s chief operating officer, said the intentions of the IRA are good for America, but they “pulled the rug out from everybody.”

EV credits or not, executives said the new Georgia plant, which was announced months before the IRA passed, is the culmination of growth for Hyundai in the U.S. They credited the progress to a systematic approach of improvement over decades and a decisive strategy to go all-in on its new products in recent years.

“We’re trying to do everything we can do, but honestly it’s always challenging, being the innovative disruptor kind of stuff. But I think so far, hopefully we’re on the right track to be responsive to the customers’ needs,” Chang said. “We like to be different.”

‘Different’ products

Hyundai’s rise

Hyundai invests $5.5 billion in new Georgia electric vehicle plant

Read More: Hyundai’s best years in the U.S. face test from Biden Inflation Reduction Act

2022-11-23 08:01:42

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