Hyundai increases investment in electric vehicles to $28 billion, to reduce operations in China

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

At its annual investor day on Tuesday, the South Korean automaker, the world’s No. 3 auto group by sales along with its subsidiary Kia (000270.KS)It said it also raised its EV sales target to 2 million units by 2030 from 1.87 million.

It would account for around a third of its total vehicle sales, up from 8% expected this year.

“With global demand for electric vehicles growing faster than market forecasts, Hyundai Motor is raising its sales target for 2030,” it said in a statement.

To meet the target, Hyundai (005380.KS) plans to boost local production of electric vehicles in its three key markets, the United States, Europe and South Korea, as more countries implement incentives for locally manufactured vehicles.

In the United States, its largest market, electric vehicle production will account for three-quarters of its total vehicle production there by 2030 from just 0.7% today.

Hyundai Motor CEO Jaehoon Chang said the automaker will consider making its vehicles more compatible with the Tesla charging standard. (TSLA.O) is driving in North America.

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

Chang told investors that China, the world’s biggest auto market, had been highly profitable until 2016, but was now the biggest risk as the automaker had lost share to domestic rivals.

Hyundai sold one plant in China in 2021 and plans to sell two more, including one that closed last year and another that it plans to close this year. The remaining two plants will be further rationalized and used to export to emerging markets.

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

To improve its battery competitiveness and develop next-generation batteries, Hyundai plans to invest 9.5 trillion won ($7.4 billion) over the next 10 years.

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

Its biggest rival Toyota (7203.T) also announced last week a plan to start using LFP batteries.

Hyundai aims to source more than 70% of batteries through joint ventures by 2028 and beyond. Other plans include collaboration with specialized companies and startups, as well as establishing joint ventures with battery companies to ensure stable supply.

“Joint research and capital investment in startups to accelerate the development of next-generation batteries is also underway,” the company said.

Hyundai said its goal was to achieve an operating profit margin of 10% or more in the electric vehicle business by 2030.

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

($1 = 1,285.2400 won)

Reporting by Hyunsu Yim and Heekyong Yang; Written by Miyoung Kim; Edited by Ed Davies, Jacqueline Wong and Conor Humphries

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