Hyundai Motor Raises $28B and Restructures China Business to Boost EV Sales

Hyundai Motor, along with its affiliate Kia, announced its plans to significantly increase investment in electrification and restructure its struggling China business as part of a broader strategy to drive electric vehicle (EV) sales. During its annual investor day, the South Korean automaker revealed that it would raise its average annual investment in electrification by almost two-thirds, totaling $28 billion, over the next decade. Additionally, Hyundai Motor increased its EV sales target to 2 million units by 2030, up from the previous target of 1.87 million.

This ambitious goal represents approximately one-third of Hyundai’s total vehicle sales, a significant jump from the expected 8% for this year. In a statement, the company explained, “With global EV demand growing faster than market forecasts, Hyundai Motor is raising its 2030 sales target.” To achieve this target, Hyundai intends to ramp up local production of EVs in key markets such as the United States, Europe, and South Korea. As more countries introduce tax benefits and incentives for locally manufactured vehicles, the company plans to take advantage of the evolving market conditions.

In the United States, Hyundai’s largest market, EV production is expected to account for 75% of its total vehicle production by 2030, a significant increase from the current figure of just 0.7%. While increasing EV sales targets in major markets, Hyundai acknowledges the need for further restructuring of its China business to prioritize profitability. CEO Jaehoon Chang highlighted that China, the world’s largest vehicle market, was previously highly profitable for the automaker but has become a significant risk due to the loss of market share to agile domestic rivals.

As part of the restructuring efforts, Hyundai has already sold one China plant in 2021 and plans to divest two more, including one that was shut down last year and another slated for closure this year. The remaining two plants will be optimized for exports to emerging markets. Hyundai’s product line-up in China will also be streamlined from 13 models to eight, with a focus on high-end and SUV models, including the luxury brand Genesis.

In addition to the restructuring plans, Hyundai Motor aims to enhance its competitiveness in batteries and develop next-generation battery technologies. The company has allocated 9.5 trillion won ($7.4 billion) for battery-related investments over the next decade. Hyundai plans to introduce competitive lithium-iron-phosphate (LFP) batteries, which are a more cost-effective alternative to lithium-ion batteries that have driven EV adoption in China. The company aims to debut LFP batteries around 2025. Toyota, Hyundai’s major rival, also announced a similar plan last week to utilize LFP batteries and offer a broader range of battery options.

Hyundai’s broader strategy includes sourcing over 70% of its batteries through joint ventures by 2028 and beyond. The company plans to collaborate with specialized firms and startups and establish joint ventures with battery companies to ensure a stable supply chain. Furthermore, Hyundai is actively engaged in joint research and equity investments in startups to accelerate the development of next-generation batteries.

Hyundai Motor sets an ambitious target to achieve an operating profit margin of 10% or higher in the EV business by 2030. Its substantial investment of 35.8 trillion won ($28 billion) in electrification is part of a comprehensive budget of 109.4 trillion won, which Hyundai plans to allocate until 2032. By aligning its resources and focusing on electric mobility, Hyundai aims to strengthen its position in the EV market and capitalize on the growing global demand for electric vehicles.

Hyundai’s decision to increase its investment in electrification reflects the company’s recognition of the accelerating global demand for electric vehicles. The automotive industry is undergoing a significant transformation, with governments, consumers, and environmental concerns driving the shift towards cleaner and more sustainable transportation solutions. By raising its EV sales target and bolstering its investment in electrification, Hyundai Motor is positioning itself to capitalize on this industry shift and secure a competitive advantage in the evolving market.

The emphasis on local production of EVs in key markets such as the United States, Europe, and South Korea highlights Hyundai’s commitment to catering to regional preferences and taking advantage of government incentives and support. By aligning its production capabilities with market demand, Hyundai aims to strengthen its market position and gain a larger share of the growing EV market. This strategic approach also allows the company to establish a more sustainable supply chain, reduce production costs, and better cater to the unique requirements of each market.

The decision to restructure its struggling China business is indicative of Hyundai’s proactive response to changing market dynamics. Recognizing the challenges posed by domestic rivals in China, Hyundai is taking measures to streamline operations, optimize resources, and refocus its product lineup. By prioritizing high-end and SUV models, including the luxury brand Genesis, Hyundai aims to position itself as a premium player in the Chinese market and regain market share. Additionally, the divestment of underperforming plants and the focus on profitability demonstrate the company’s commitment to improving its financial performance and achieving long-term sustainability.

Hyundai’s focus on battery technology and its plans to invest in the development of next-generation batteries highlight the company’s commitment to advancing electric mobility. By allocating a significant portion of its budget to battery-related investments, Hyundai aims to stay at the forefront of battery technology and address key challenges such as cost, range, and charging infrastructure. The introduction of competitive lithium-iron-phosphate (LFP) batteries indicates Hyundai’s intention to provide affordable yet reliable battery options for consumers, further driving EV adoption and market growth.

Collaboration with specialized companies, startups, and battery manufacturers is another strategic move by Hyundai to foster innovation and ensure a stable supply of batteries. By leveraging external expertise and forming partnerships, Hyundai can access cutting-edge technologies, accelerate research and development, and overcome potential bottlenecks in the supply chain. These collaborations also create opportunities for knowledge sharing, cross-industry synergies, and the exploration of new business models that can drive future growth and sustainability.

Hyundai’s ambitious operating profit margin target in the EV business demonstrates the company’s commitment to financial success in this rapidly evolving sector. By setting a high benchmark, Hyundai is challenging itself to improve efficiency, reduce costs, and maximize profitability. Achieving a double-digit operating profit margin in the EV business by 2030 would position Hyundai as a leader in the industry and ensure its long-term viability in the electric mobility landscape.

Hyundai Motor’s increased investment in electrification, higher EV sales targets, and restructuring of its China business represent a comprehensive strategy aimed at capitalizing on the global shift towards electric vehicles. By aligning its production capabilities, optimizing operations, and focusing on battery technology, Hyundai seeks to strengthen its market position, drive sustainable growth, and contribute to a cleaner and greener future of transportation. With its ambitious goals and strategic initiatives, Hyundai Motor is poised to play a significant role in shaping the future of the automotive industry.