The world’s third-largest carmaker isn’t from the US, Japan or Europe, at least not anymore. It’s South Korea’s Hyundai Motor Co.
While Toyota Motor Corp. and Volkswagen AG vie each year for pole position atop the global automobile industry, Hyundai has quietly slipped in behind them, surpassing General Motors Co., Nissan Motor Co. and Stellantis NV in annual volumes along the way.
Founded 55 years ago as a manufacturer of affordable vehicles for its home market, Hyundai’s international expansion only began in earnest in the 80s. After working for decades to shake its image as an upstart, Hyundai’s Genesis is now going head-to-head with other luxury car brands, while the carmaker is duking it out with Ford Motor Co. for second place in US electric vehicle sales this year, behind Tesla Inc.
“We are on the right track, and this year we were very strong,” President and co-Chief Executive Officer Jaehoon Chang, 58, said in an interview from a library at Hyundai’s Seoul headquarters last week. “Our supply chain management was key. We’re trying to be flexible, and optimize and protect production as much as we can in spite of the chip shortage.”
With greater scale, however, comes bigger challenges, including the suspension of a large factory in Russia and new US legislation that could hurt EV subsidies. The manufacturer also faces higher raw material costs, an ongoing chip shortage and allegations that Hyundai’s suppliers in Alabama hired underage workers. North America represented 21% of total sales last year, making it Hyundai’s biggest single market, while just 17% of revenue came from its home market.
Hyundai’s global presence is rooted in the company’s strong manufacturing base in South Korea. At Ulsan, located at the mouth of the Taehwa River on the peninsula’s eastern coast, it operates the world’s biggest assembly plant with an annual production capacity of 1.4 million vehicles. From the vessels shipping cars abroad to the steel used in both, all are part of the same conglomerate, started by the grandfather of Euisun Chung, Hyundai Motor’s other CEO and executive chair.
With another nine factories spread across the globe, the automaker sold 6.6 million vehicles in 2021. This year, revenue is on track to expand 21% to 141.7 trillion won ($108 billion), the highest growth rate among major carmakers, according to the average of analysts’ projections.
Critical to those gains, and its prospects going forward, is Hyundai’s embrace of electrification. While other carmakers take more deliberate steps, the South Korean company raced ahead, pushing out models such as the Ioniq 5 and affiliate Kia’s EV6 just as demand started to outpace supply. At the same time, Volkswagen has struggled to get its EV strategy on track, while Toyota is still hedging its bets, betting on hybrids and hydrogen fuel cells, as well as EVs.
Emboldened by that success and backed by 19.4 trillion won in investments, Hyundai plus Genesis plans to introduce at least 17 battery-powered EVs by 2030, as well as 14 by Kia, which will be a “huge enabler” to reach the company’s goal of 1.87 million annual EV sales in 2030, Chang said. That would represent 11% of the US market, and 7% globally, according to the automaker.
Leading the charge is the Ioniq 6, Hyundai’s latest EV. Introduced earlier this year, the sedan can travel as far as 610 kilometers (379 miles). With a sleek, rounded body and interior lighting that can change color depending on the speed of the car, the Ioniq 6 is aimed at younger buyers.
Ioniq 6 sales in South Korea began in September at prices starting at 52 million won, or $40,000. In Europe, home to some of the biggest EV-adopting countries, pre-sales for an initial allotment of 2,500 Ioniq 6s sold out in less than a day. It was “actually few hours — proven evidence of demand,” Chang said. The US rollout will begin in early 2023.
Genesis sales will expand 10% this year to 220,000 units, Hyundai forecasts. In a move that will pit it more directly against Tesla and legacy brands such as BMW and Mercedes-Benz, Hyundai plans to make its Genesis luxury line fully electric by the end of the decade.
“This segment has a high barrier to get into, so that was very challenging once we started,” Chang said. “So we focused on design first, how we can be differentiated from others. We focused more on the drivers, more on the passengers, let them feel comfortable — to define luxury as comfort.”
This week, Hyundai also unveiled the latest iteration of its Kona subcompact SUV, designed first as an EV but also being made available with a combustion engine and hybrid variants.
While Hyundai may be navigating the EV transition more smoothly than some peers, it also faces shared challenges.
Asked whether Hyundai was close to any decision regarding the fate of its plant in Russia, where operations have been suspended since the start of the war in Ukraine eight months ago, Chang said company had little choice but to “monitor the situation.”
“It’s not easy for us, because of the scale of the plant,” he said. While Toyota and Nissan exited Russia in recent months, Hyundai has a much bigger operation in St. Petersburg that, together with Kia, assembled about 200,000 vehicles a year before the war, or around 4% of the automaker’s global output.
Regarding China, where Hyundai is seeking to reposition itself as a more upmarket brand, Chang said “we need to sharpen our edge.” Car sales in what is the world’s biggest market declined 4.2% last month as Covid-related lockdowns kept buyers aways from showrooms.
In Alabama, Hyundai is investigating allegations that two suppliers, Hwashin America Corp., a Korean maker of chassis and auto-body components, and Ajin Industrial Co., a Korean auto-parts manufacturer, both employed minors at their plants in Greenville and Cusseta, Alabama.
“Hyundai does not condone or tolerate violations of labor law,” the automaker said in an emailed statement. “We mandate that our suppliers and business partners strictly adhere to the law, and we take reports of alleged violations very seriously.”
Another challenge for Hyundai is the US Inflation Reduction Act, which requires that EVs be assembled in North America with batteries made from materials sourced from friendly trading partners in order to quality for tax credits. Hyundai has been working with the South Korean government to persuade the US Treasury Department to tweak the bill or loosen enforcement as it works to finalize guidance.
“This is a very critical moment,” Chang said. While the legislation requires carmakers to assemble their EVs in North America to receive the subsidy, Hyundai doesn’t yet have any operational EV plants, although it is seeking to build a $5.5 billion EV and battery facility in Georgia. “We’re expecting some flexibility in giving us more time to be fully ready for this.”
--With assistance from Sabrina Mao.