Hyundai Motor shifts focus to hybrids as EV sales slow

Industry

Hyundai Motor shifts focus to hybrids as EV sales slow

Published: 31 Jul. 2024, 18:26

SARAH CHEA
chea.sarah@joongang.co.kr

Hyundai Motor employees manufacture cars at the company's factory in Montgomery, Alabama. Hyundai produces Santa Fe hybrid SUVs at the plant. [HYUNDAI MOTOR]

[NEWS IN FOCUS]

Hyundai Motor is adding hybrid models to all of its existing lineups, a major strategic shift from prior plans that heavily favored pure electric vehicles as EV sales growth continues to slow.

Genesis, a luxury stand-alone brand under Hyundai, is also preparing to introduce a hybrid model, scrapping its original plan of turning to an all-electric brand starting in 2025.

A render of Hyundai Motor's $5.5 billion manufacturing plant in Georgia. Hyundai is adding a hybrid production line to the plant, which was initially designated only for the production of EVs. [HYUNDAI MOTOR]

Hyundai posted a record-high operating profit of 4.28 trillion won ($3.1 billion) in the second quarter as surging sales of hybrid cars defended sluggish EV movement. Hybrid car sales jumped 26.4 percent while those of battery-powered EVs dipped 25 percent.

“Hyundai is considering a significant ramp-up in our production capacity of hybrid cars in response to the stalling EV market and a possible cut in Inflation Reduction Act [IRA] incentives,” said Lee Seung-jo, senior vice president of the automaker's finance division, during a conference call last week.

Lee had commented that the company was in the process of “adding hybrids to all of its lineup” earlier this year.

Hyundai’s new approach will begin with new investments in its under-construction $5.5 billion manufacturing plant in Georgia, which was initially designed exclusively for EV production.

Hyundai will add a hybrid production line to the plant, though specific details such as the investment's size and production line's capacity have not been determined yet.

Hyundai Motor employees manufacture cars at a factory in the Czech Republic where the company produces Tucson hybrid SUVs. [HYUNDAI MOTOR]

Hyundai Motor is also expected to introduce a hybrid version of the Palisade SUV early next year.

Hybrid cars, which are powered by both an internal combustion engine and an electric motor, are widely considered a cost-effective option as they have the ability to charge their own batteries while driving through regenerative braking.

Business-wise, hybrid cars are more profitable than all-electric cars. Hybrid vehicles often bring double-digit profit margins, percentage-wise, while battery-powered cars lag in the single digits. But the hybrid market is currently dominated by a few Japanese players, including Toyota and Honda Motor.

A hybrid version of the Grandeur sedan [HYUNDAI MOTOR]

A hybrid version of the Sorento SUV [KIA]

“Driven by the Biden administration’s retreat on its EV push, customer preference leans toward hybrids, not only in Europe, but also in the United States,” said Han Byung-hwa, a researcher from Eugene Investment & Securities.

“If Trump wins the upcoming U.S. presidential election, EV sales will likely meet a sharper drop.”

U.S. sales of pure EVs dropped 5.7 percent on year to around 97,000 units in June while hybrid sales jumped 32.5 percent to 134,000 units.

Song Min-kyu, global head of Genesis also confirmed that the company is “planning to launch a hybrid model on its journey to full electrification,” a change to its previous plans which had indicated that it would release only battery-powered EVs starting in 2025.

Song did not confirm additional details but added that the release would come “as soon as possible at the most suitable time after going through all thorough tests.”

Kia CEO Song Ho-sung also picked hybrid cars as his “first preventive strategy” to adapt to stalling EV sales “that will likely continue until 2026,” during an investor event in April.

Kia currently has six hybrid models, a number that will increase to nine in 2028, according to Song.

The next model to receive a hybrid option will be the Seltos small SUV, which will make a comeback with a fully revamped version next year. Seltos is Korea’s best-selling car in the small SUV category.

The new strategy is in line with those of other global automakers that have paused their EV push and turned their attention to hybrid cars.

Ford Motor announced that it would introduce hybrid options in its entire North American lineup by 2030, halting the production of a three-row electric SUV and a pickup truck.

General Motors said it would cut its EV production target to 250,000 units this year from the goal of 1 million it had previously announced.

BY SARAH CHEA [chea.sarah@joongang.co.kr]