Hyundai Motor Group ready to spend big in the U.S.

Hyundai Motor Group has lately had a lot to say about its ambitions in electric vehicles and advanced transportation technologies. Last week, it vowed to put its money where its mouth is.

The South Korean automaker said it will invest $7.4 billion in the U.S. by 2025 to produce a "suite" of electric vehicles, upgrade factories and develop smart mobility technologies.

Hyundai Motor Group, which includes Hyundai, Kia and Genesis, aspires to sell 1 million electric vehicles globally and take a 10 percent market share to leapfrog to the front of the EV field by mid-decade. Hyundai is launching a global battery-electric brand that uses the Ioniq name from its current hybrid and EV hatchbacks.

The new investment plans — although Hyundai has not yet spelled them out — illustrate a significant new issue for the industry as it rushes to electrify: Importing vehicles into the U.S. is a passing luxury. Automakers must consider local production for vehicles and batteries as they turn to EVs, and that will come with vast new capital investment. Shipping the heavy and technologically advanced vehicles from overseas factories appears to be a nonstarter.

But Hyundai's announcement last week was heavy on potential and light on detail.

The automaker did not say which of its U.S. plants will receive the investments, or if it plans to build factories. Hyundai operates one assembly plant in Montgomery, Ala., while Kia operates a factory in West Point, Ga., and another in Mexico.

Hyundai also left wiggle room to adjust the plan — noting that it will monitor market conditions "and U.S. government EV policy" to finalize plans for U.S. production facilities and gradually expand local EV production.

Sam Abuelsamid, Guidehouse Insights' principal analyst, nonetheless described Hyundai's proposed investment in the U.S. as "aggressive."

Given the timing of EV production starting in 2022, it likely means the addition of production at one, if not both, of Hyundai Motor Group's domestic plants, Abuelsamid said.

"Beyond that, the investment might include at least one additional plant dedicated to EV production," he said.

Speaking last month during an Automotive News Congress Conversations webcast, Hyundai Motor North America CEO Jose Muñoz stressed the growing importance of investment in the new field.

"We are in the midst of a big transformation of our portfolio, bringing plug-in hybrids and bringing hybrids and battery-electric EVs in order to ensure that we are not fast followers but really pioneers in the new emerging green market," he said.

Hyundai is the latest automaker to make a big-budget commitment to electric vehicles.

General Motors is spending $2 billion to renovate its assembly plant in Spring Hill, Tenn., for EV production. Ford is investing $1.45 billion to retool its Oakville, Ontario, plant to build battery-electric vehicles.

Also in Canada, Stellantis will spend $1.2 billion to prepare for production of plug-in hybrids and BEVs.

The auto industry is now in an expensive EV race to see who can invest the most and get the attention, said Jeff Schuster, president of global forecasting at LMC Automotive.

"The challenge will be finding the balance between investment without return and meeting the needs of consumers today," Schuster said.

Investing in EV production stateside could be strategic.

"Building EVs in the U.S. may give Hyundai some political advantages as the Biden administration's proposal to push EV adoption favors U.S.-built EVs," noted Michelle Krebs, executive analyst at Autotrader.

Yet while the auto industry bull-rushes to launch fleets of EVs, Americans are still skeptical about the practicality and affordability of battery power.

Automakers intend to introduce more than 100 EV models in the U.S. over the next four years. Meanwhile, adoption lingers at less than 2 percent, according to Guidehouse data.

Hyundai is positioned to wait it out until consumer demand catches up with the industry's enthusiasm.

"It has an array of options, from internal combustion engines to hybrids and plug-in hybrids to EVs and fuel cell vehicles, to cover its bases until the EV inflection point comes — a time no one can precisely pinpoint," Krebs said.

But Hyundai faces the same speed bumps on the road to electrification as its peers.

"Price, range and charging infrastructure remain a challenge to all EV makers but luxury ones," Krebs said. "And making money on EVs is still a work in progress."

Another issue throttling the industry's EV plans is an anemic battery supply. Hyundai Motor Group has had to limit and allocate EVs to various markets because of how many cells it could source, Abuelsamid noted.

With its U.S. investment, Hyundai could follow the path of GM, Volkswagen and Stellantis and in-source some cell production either directly or through a joint venture, he said.

Meanwhile, Hyundai is working with public and private partners to expand the U.S. hydrogen ecosystem. Later this year, Hyundai said it "will proceed on a demonstration project in preparation for commercialization of fuel cell electric trucks."

The automaker also said it will pursue investments in urban air mobility, robotics and autonomous technologies.