Hyundai to invest $7.4 bln in U.S. by 2025, with electric cars in focus

South Korea's Hyundai Motor Group said it planned to invest $7.4 billion in the United States by 2025 to produce electric vehicles, upgrade production facilities and further its investment in smart mobility solutions.

Hyundai's announcement comes as U.S. President Joe Biden's administration prioritized a push toward electric cars, aiming to replace the 650,000 vehicles in federal fleets with U.S.-made electric vehicles.

In January, Biden also signed an executive order aimed at imposing tougher rules on government procurement practices to increase purchases of American-made products, strengthening domestic manufacturing and create markets for new technologies.

Analysts said Hyundai's U.S. investment was essential to take advantage of the Biden administration's EV policies and to receive subsidies and tax incentives.

"If Hyundai seeks to fully leverage U.S. EV policies, they need to pursue not only EV production but also sourcing major auto parts in the United States," said Kevin Yoo, an analyst at eBEST Investment & Securities.

Lee added that it is up to how the South Korean carmaker sources U.S.-made batteries for its U.S. EV production, raising potential further investment in the United States by top battery makers.

Hyundai's announcement came before U.S. President Joe Biden meets with South Korean President Moon Jae-in in Washington next week in talks that are expected cover North Korea, COVID-19 vaccines and other topics. read more

Biden has called for $174 billion in new spending to boost electric vehicles and charging. read more

The group's Hyundai Motor Co (005380.KS) will begin electric vehicle production at a U.S. facility in 2022, while affiliate Kia Corp (000270.KS) also plans to build electric vehicles in the United States. Hyundai has a factory in Alabama, while Kia produces cars at a plant in Georgia.

"We are reviewing options including expanding on our production facility after we’ve taken a closer look at U.S. market conditions and U.S. government’s new EV policy," Hyundai said in a statement to Reuters.

The move comes as Hyundai's major electric battery supplier, SK Innovation (096770.KS), proceeds with construction of new U.S. factories for Volkswagen (VOWG_p.DE) and Ford (F.N) and plans to expand capacity in the United States.

SK Group chairman Chey Tae-won has said SK could invest up to $5 billion for battery business in the United States, meaning it appears there is room for SK to invest further in the U.S., a person familiar with the matter told Reuters on Friday.

Since 2018, SK Innovation has so far invested about 3 trillion won ($2.6 billion) to build two EV battery factories in Georgia.

Hyundai Motor Group, South Korea's No. 2 conglomerate, did not provide the investment breakdown but said the spending would be primarily for Hyundai and Kia. Analysts said that Hyundai is likely to allocate the biggest amount to its EV capex, and that spending for cooperation with other U.S. companies could be more flexible depending on how the U.S. EV market changes.

Hyundai said it will work with the U.S. government and business partners to install hydrogen refueling stations and offer its NEXO hydrogen SUVs.

Hyundai is also investing in robotics, urban air mobility and autonomous driving technology, the company said.