While America’s carmakers worked to develop electric pick-up trucks, Korean rival Hyundai went smaller — and won bigger.
By focusing on sleeker sedans and compact SUVs that consumers can afford, the Korean group and its sister brand Kia have together overtaken Ford and General Motors to claim second place in US electric vehicle sales behind Tesla.
Combined US EV market share for the two brands was 7.5 per cent for the first three-quarters of 2023, well behind Tesla on 57.4 per cent, but ahead of GM’s Chevrolet on 5.9 per cent and Ford on 5.5 per cent.
The US may lag China, which is the world’s largest EV market, but it is a big profit pool for the industry, and is expected to transition to the vehicles over time. Hyundai reported last week that US sales grew 5 per cent year-on-year in the fourth quarter, with sales of its Ioniq 5 EV nearly doubling.
The Korean podium slot caps two decades of growth that has seen the transformation of the business from a little-known foreign entrant to one of the market’s most dominant marques — and one positioned to thrive in the EV era.
“Electric [driving] was something which we saw as a very solid, very clear trend, and we needed to take advantage,” said José Muñoz, Hyundai’s chief operating officer and head of the business in North America.
Its electric sales growth in the US is particularly striking given Hyundai cannot offer consumers a $7,500 discount. Unlike some models from Ford, GM, Volkswagen and Nissan, its EVs are not built in the US and so do not qualify for the tax credit under President Joe Biden’s Inflation Reduction Act.
Hyundai Motor Group, which owns the Hyundai, Kia and Genesis brands, also has the fourth-largest share of the overall US car market, behind Toyota, Ford and GM, according to sales data from S&P Global.
“Hyundai and Kia used to be regarded in the US as low-end, unreliable cars,” said Troy Stangarone, senior director at the Korea Economic Institute of America. “But now, not only are their electric vehicles seen as at least as good as their Tesla equivalents, they are cheaper too,” he added. “That has led to a very sharp rise in sales in a very short amount of time.”
With the IRA offering tax credits to purchasers of EVs assembled in North America, Hyundai is building a $7.6bn plant in Georgia, the largest investment of any carmaker in a new US electric vehicle factory. But until it comes on stream in 2024, the company will remain at a comparative disadvantage.
However, Hyundai and Kia have benefited from a loophole allowing EVs assembled outside North America to qualify for the credits if they are leased rather than sold, with leased vehicles accounting for approximately 40 per cent of the companies’ total EV sales.
Hyundai has unquestionably been helped by mis-steps from the US’s domestic players. GM’s all-electric Chevy Bolt was too small for many consumers, while the company also developed a costly battery-powered version of its giant Hummer SUV.
While Ford’s first electric car, the Mustang Mach-E, was well received by motoring audiences, it was made using the base from an existing petrol model, rather than taking a ground-up approach. Ford’s electric pick-up truck, the F-150 Lightning, is critical for the group to defend its profit pool in trucks, but it has left the small SUV space wide open.
“Hyundai is one of the few companies producing EV sedans, while the big three US automakers focus on making large SUVs and pick-up trucks,” said Kim Tae-nyun, head of the Mirae Mobility Research Center in Seoul.
“This meant it was able to make rapid inroads in the US market despite its relatively late entry into the EV space.”
Hyundai also developed ground-up EVs that are not based on its existing petrol models, meaning its cars are cheaper, more spacious and have better ranges and driving dynamics than those that are retrofitted to an existing system.
“One reason people lose money is where they try to repurpose internal combustion engine vehicles and add a battery,” said Hyundai’s Muñoz. “It’s very, very difficult to make the vehicle competitive when you come to range, functionality or price.”
While most other carmakers have taken a similar approach, the Korean group acted earlier and its vehicles have been better received than those on dedicated EV platforms from rivals such as VW.
The group’s progress in the US is part of a wider global push, targeting the European, Indian and south-east Asian markets after a collapse of its sales in China over the past decade.
Hyundai Motor’s Chinese revenues dropped by 76 per cent between 2016 and 2022, according to Seoul-based market research firm CEO Score, after Beijing imposed an unofficial embargo on Korean products in 2016 in reaction to the stationing of a US missile defence system in South Korea.
Lee Hang-koo, president of the Jeonbuk Institute of Automotive Convergence Technology, said the effects of the embargo had been exacerbated by Hyundai “trying to compete with Chinese automakers on price without adding cutting-edge digital features to its vehicles”.
But its setbacks in China could be offset by success in India, which recently overtook Japan as the third-largest car market in the world after China and the US.
Hyundai operates two car plants in the south-eastern city of Chennai, which between them boast an annual production capacity of 820,000 vehicles. In August, it signed a deal to acquire a GM plant in the western Indian state of Maharashtra, which it intends to use to produce EVs as it targets producing 1mn vehicles a year for the local market.
Lee said Hyundai was doing “exceptionally well” in the country because of its focus on compact cars tailored for the Indian market. But he cautioned that South Korea’s traditional weakness in software could prove a stumbling block in the longer term.
“Korea lacks auto software engineers and Hyundai is weak in that field, so it is expanding co-operation with foreign tech companies,” said Lee. “Securing the necessary technologies for upgrading an operating system is essential for the future, but Hyundai will probably have to rely on external help.”
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