South Korean auto major Hyundai has announced a massive $18 billion investment in the country through 2023 as legacy automakers scale up their EV (electric vehicle) plans amid the global pivot to zero-emission cars.
The Hyundai Motors group includes Hyundai Motors, Kia, and Hyundai Mobis and Kia recently announced a $24 billion investment which is separate from the current investment.
According to Kia around 45% of the investment would be towards “future business areas” – as the company targets $122 billion in gross revenues by 2030.
The automotive industry is a key contributor to South Korea’s GDP and the country’s President Yoon Suk Yeol attended the groundbreaking ceremony of Kia’s first EV plant in the country.
The plant is set to begin production in 2025 and is the first new automotive plant that Kia has set up in South Korea in three decades.
Hyundai Announced $18 Billion EV Investment
Hyundai is targeting an annual EV volume of 3.64 million by 2030 and intends to be among the top three EV producers globally.
All the legacy automakers are ramping up their EV capacity and have announced massive investment plans.
Last week, Toyota announced its new EV plans and is targeting 10 new models by 2026 with an annualized production run rate of 1.5 million.
In March, Volkswagen announced a massive 180 billion euros ($192.6 billion) investment over the next five years – two-thirds of which would go toward electric vehicles and digitization.
Last year, Volkswagen said that by 2025 its EV sales can overtake Tesla which is currently the market leader with total EV sales of 1.31 million in 2022.
This year, Tesla is targeting EV production of 1.8 million but the Elon Musk-run company has had to slash prices multiple times in an apparent bid to spur sales.
- Read our guide on buying Tesla stock
Automakers are Ramping Up Their EV Investments
Musk believes that Tesla can sell as many as 20 million cars annually by 2030 and the company would need to set up more plants in order to meet the demand.
Last month, Tesla confirmed that it would set up its next Gigafactory in Mexico – but stressed that the plant won’t replace US capacity and instead complement its global capacity.
Notably, other legacy automakers are also scaling up their EV production. Ford expects to spend around $50 billion through 2026 which would increase its annual EV production capacity to 2 million by the end of 2026.
General Motors also committed to invest $35 billion towards EVs between 2020 and 2025 and forecast an annual EV production capacity of 1 million by 2025.
General Motors became the first Detroit automaker to commit to a zero-emission future and in 2021 its CEO Mary Barra said that the company won’t sell ICE (internal combustion engine) cars after 2035.
Automakers’ Electric Car Businesses are Posting Losses
Meanwhile, as legacy automakers scale up their EV investments, they are also witnessing higher cash outflow as well as soaring losses in the EV business.
Ford said that its EV business which has been rechristened Model e lost $900 million in 2021 and $2.1 billion in 2022 – and is expected to lose $3 billion in 2023 as well.
Ford said that the EV business would become profitable by the end of 2026 and hit a pre-tax margin of 8%. The company expects its consolidated pre-tax margins to hit 10% by 2026.
- Read our guide on buying Ford stock
General Motors’ EV business is also posting losses but America’s largest automaker expects the business to become “strongly profitable” by 2025.
Meanwhile, the ongoing price war in the electric car industry might only intensify in the coming years as the competition intensifies – especially with Hyundai also joining the EV bandwagon and committing billions of dollars to ramp up production.
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This article was written for Business 2 Community by Mohit Oberoi.
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