Hyundai’s Strategic Move: Why It’s Betting Big on the US | TDG Explainer

Hyundai’s decision to expand its operations in the United States isn’t just a boost for the automotive industry — it’s a catalyst for overall economic growth. Former US President Donald Trump recently praised Hyundai as a “great company” contributing to America’s prosperity, highlighting how global corporations like Hyundai are playing a key role in revitalizing the US economy.

But how exactly does this expansion benefit the US? Let’s dive in.

Hyundai’s $5.5 Billion Investment in the US

Hyundai, the South Korea-based automotive giant, has announced plans to invest over $5.5 billion to build an electric vehicle (EV) and battery manufacturing plant in Georgia, USA. This move has generated widespread interest as it positions Hyundai to play a major role in shaping America’s electric vehicle revolution.

Why the US is Hyundai’s Top Choice

1. US Offers a Larger and More Profitable Market

The US is one of Hyundai’s largest and fastest-growing markets. With over 15 million vehicles sold in the US in 2023 compared to Japan’s 4.4 million, the American market offers significantly higher revenue potential.

• Rising EV Demand: The US is rapidly transitioning towards electric vehicles, and Hyundai aims to capture a larger share of this growing market.
• Diverse Consumer Preferences: Unlike Japan, where local brands dominate, the US market is open to international brands, giving Hyundai a competitive edge.

2. US Government Incentives for EV Manufacturing

The Inflation Reduction Act (IRA) of 2022 offers substantial tax incentives and subsidies for companies that manufacture electric vehicles and batteries in the US.

• Hyundai’s Strategic Goal: By producing EVs in the US, Hyundai ensures its vehicles qualify for federal tax credits, making them more affordable for American consumers.
• Competitive Edge: Competing with US-based EV leaders like Tesla and Ford requires Hyundai to take advantage of these government incentives.

3. Georgia: A Perfect Manufacturing Hub for Hyundai

Hyundai’s decision to set up its EV and battery plant in Georgia was driven by several factors:

• Tax Incentives: Georgia provided over $1.8 billion in tax incentives to attract Hyundai’s investment.
• Proximity to Major Ports: The Port of Savannah is one of the busiest in the US, facilitating smooth export and supply chain operations.
• Skilled Workforce: Georgia has invested heavily in tech education and has a growing talent pool in EV and battery technology.

Result: Hyundai’s Georgia plant is expected to produce 300,000 electric vehicles annually, further cementing its presence in the US EV market.

Why Not Japan? Hyundai’s Calculated Decision

1. Japan’s Market is Tough for Foreign Automakers

Japan’s auto market is dominated by domestic brands such as Toyota, Honda, and Nissan, making it extremely difficult for foreign companies to gain traction.

• Hyundai’s Exit in 2009: Due to poor sales, Hyundai withdrew from the Japanese market in 2009 and only re-entered in 2022 with a limited focus on EVs.
• Local Brand Loyalty: Japanese consumers tend to prefer homegrown brands, limiting Hyundai’s growth potential in the region.

2. No Equivalent Incentives in Japan

Japan does not offer as attractive incentives or subsidies for EV manufacturers as the US does. Hyundai’s decision to invest in the US allows them to benefit from government incentives that Japan currently lacks.

How This Move Benefits South Korea

1. Strengthening US-South Korea Trade Relations

Hyundai’s massive investment strengthens economic and diplomatic ties between the US and South Korea.

• KORUS FTA Advantage: The Korea-US Free Trade Agreement (KORUS FTA) facilitates smoother operations and trade between the two nations.
• Positive Trade Relations: Hyundai’s presence in the US boosts South Korea’s standing as a key economic partner, paving the way for future trade agreements.

2. Boosting Hyundai’s Global Competitiveness

By investing in the US, Hyundai enhances its global brand value and maintains its position as a top player in the global EV market.

• Access to New Technologies: Hyundai benefits from the US’s innovation ecosystem and partnerships with leading American tech companies.
• Driving Innovation: Hyundai’s US-based R&D centers foster advancements in autonomous driving, AI, and battery technology, ensuring the company stays ahead of the curve.

Economic Impact on the US

1. Job Creation and Local Economic Growth

Hyundai’s investment is expected to create 8,100 direct jobs in Georgia and thousands of indirect jobs through supply chains and allied industries.

Ripple Effect: Hyundai’s presence will boost local economies, attract more companies, and generate long-term economic benefits.

2. Building a Strong Local Supply Chain

Hyundai’s move reduces dependence on overseas supply chains, lowering costs and ensuring smoother operations.

Supporting US Suppliers: Hyundai will source materials and components locally, further boosting American manufacturing.

Conclusion: A Win-Win for Hyundai, the US, and South Korea

Hyundai’s $5.5 billion investment in the US is a carefully planned strategic move aimed at:

• Expanding its footprint in the growing US EV market
• Leveraging US government incentives to make EVs more affordable
• Strengthening economic ties between South Korea and the US
• Driving innovation and securing its place in the future of mobility

By choosing Georgia as its manufacturing hub, Hyundai not only positions itself for long-term success but also contributes significantly to US economic growth. This move ensures that Hyundai remains a global leader in the automotive industry while fostering stronger ties between the US and South Korea.