Hyundai Motor Doubles Q1 Profit And Secures $5 Billion Battery JV In US

Hyundai Motor Co announced on Tuesday that it has concluded a $5 billion joint venture for electric vehicle (EV) batteries in the United States. This move is expected to enhance the company's efforts towards electrification in its biggest market.

Hyundai exceeded expectations by more than doubling its net profit in the first quarter, leading to a surge in its shares by up to 5% and a seven-month high. Furthermore, the automaker has taken steps to enhance shareholder returns, which contributed to the positive market reaction.

Hyundai, in partnership with SK On, a battery unit of SK Innovation Co Ltd, has announced plans to establish a battery production facility in Georgia. This decision formalizes a previous provisional agreement between the two companies. The move comes in response to the new sourcing regulations for EV battery components and essential minerals in the United States.

In order to qualify for tax credits of up to $7,500 under the Inflation Reduction Act (IRA) of the Biden administration, car buyers must adhere to these requirements. Currently, Hyundai and its sister company, Kia Corp, do not meet the eligibility criteria for these tax credits.

During the first state visit to the United States by a South Korean leader in 12 years, South Korean President Yoon Suk Yeol announced that some of the country's top corporate executives, such as Euisun Chung, Executive Chair of Hyundai Motor Group, are accompanying him on the trip.

At the same time, rival companies General Motors Co (GM.N) and Samsung SDI have announced their plan to invest more than $3 billion in constructing a joint venture electric vehicle (EV) battery manufacturing facility in the US.
The Hyundai-SK On Georgia factory is anticipated to begin producing battery cells in the second half of 2025, with a 35 GWh annual production capacity, enough to facilitate the production of 300,000 EVs.

Hyundai, which manufactures the Tucson sport-utility vehicles (SUVs) and Elantra sedans, reported a net profit of 3.3 trillion won ($2.47 billion) for the January-March period compared to a profit of 1.6 trillion won a year earlier, thanks to an increase in vehicle output as a global chip shortage eased and demand for its high-margin SUVs remained strong. Comparatively, First-quarter profit estimate of 2.3 trillion won from 16 analysts was provided by Refinitiv SmartEstimate.

"On top of strong car demand, raw material costs have continued to stabilise and drop since late last year, helping Hyundai achieve better profitability," said Lee Jae-il, an analyst at Eugene Investment & Securities.

According to Seo Gang Hyun, the head of Hyundai's planning and finance division, Hyundai and Kia vehicles are competitive in the U.S. market due to their favorable pricing and exchange rates. However, he also noted that a significant portion of the company's U.S. sales still come from conventionally powered SUVs and luxury Genesis cars.

"So I would say that the impact of the Inflation Reduction Act would not be as substantial as you are concerned about," he told analysts on an earnings call after being questioned about the issue.
Hyundai and Kia also announced plans to invest a combined 1.05 trillion won to enhance their ownership in the autonomous mobility company 42dot Inc. in order to preserve control and boost its operational competitiveness.