Hyundai raises EV investment to $28 bln, to reduce China operations

Credit: REUTERS/FRANCIS MASCARENHAS

By Hyunsu Yim and Heekyong Yang

SEOUL, June 20 (Reuters) - Hyundai Motor will raise average annual investment in electrification by nearly two thirds to $28 billion in the next decade and further restructure its struggling China business as part of a broader strategy to boost electric vehicle (EV) sales.

In its annual investor day on Tuesday, the South Korean automaker, the world's No. 3 auto group by sales together with its affiliate Kia 000270.KS, said it also raised its EV sales target to 2 million units by 2030 from 1.87 million.

It would represent around one third of its total vehicle sales, up from 8% expected this year.

"With global EV demand growing faster than market forecasts, Hyundai Motor is raising its 2030 sales target," it said in a statement.

In the United States, its biggest market, EV production will account for three quarters of its total vehicle production there by 2030 from just 0.7% now.

While it raised EV sales targets in its major markets, Hyundai said it would further restructure its struggling China business to focus on profitability.

Hyundai CEO Jaehoon Chang told investors that China, the world's largest vehicle market, had been very profitable up until 2016 but it was now the biggest risk as the automaker had lost market share to nimble domestic rivals.

Its product line-up in China will also be reduced to eight from 13, focusing on high-end and SUV models including the Genesis luxury brand.

To enhance its competitiveness in batteries and develop next-generation batteries, Hyundai Motor plans to invest 9.5 trillion won ($7.4 billion) over the next 10 years, it said.

Hyundai Motor said it plans to introduce competitive lithium-iron-phosphate (LFP) batteries, a cheaper alternative to lithium ion batteries that have spurred EV adoption in China, for the first time around 2025.

Hyundai aims to source more than 70% of batteries through its joint ventures by 2028 and beyond.

Other plans include collaboration with specialised companies and startups, as well as establishing joint ventures with battery companies to ensure stable supply.

"Joint research and equity investment in startups to accelerate the development of next-generation batteries is also under way," the company said.

The Seoul-based automaker said it aimed to achieve an operating profit margin of 10% or higher in the EV business by 2030.

Its investment of 35.8 trillion won ($28 billion) in electrification is part of a 109.4 trillion won budget Hyundai plans to spend through to 2032.

($1 = 1,285.2400 won)

Hyundai's plans for EVs, restructuring in China

(Reporting by Hyunsu Yim and Heekyong Yang; Writing by Miyoung Kim; Editing by Ed Davies and Jacqueline Wong)

((Hyunsu.Yim@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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