Supply-side Paradox
Hyundai Motor Group is ramping up its use of Chinese-made batteries. Its strategy is to speed up a transition to electric vehicles by diversifying its sourcing as it is difficult to secure electric vehicle batteries that meet the requirements of the U.S. Inflation Reduction Act (IRA).
Hyundai Motor loaded CATL batteries in its second EV model, the All-New Kona Electric, launched last month, according to industry sources on May 10. CATL is a Chinese battery giant. Although the batteries were made in China, they are ternary lithium-ion batteries using nickel, cobalt, and manganese rather than lithium ferrophosphate (LFP). They are more expensive than LFP batteries, but their high density boosts electric vehicles mileage. They are 64.8 kW batteries and enable an electric car to run 417 kilometers on one single charge according to their certification in Korea.
Hyundai Motor Group has recently installed Chinese-made batteries in passenger cars after commercial electric vehicles (the Porter EV and the Bongo EV).
Hyundai Motor Group, which put Chinese CATL batteries into Kia’s new Niro EV launched in 2022, will also use CATL batteries in models to be produced this year. Kia Corp. is preparing to equip the Ray EV already powered by Chinese batteries with cell-to-pack (CTP) batteries through battery pack technology collaboration with CATL.
Industry insiders are predicting that CATL batteries will go into Hyundai Motor Group’s 140,000 vehicles including the Porter EV, the Niro EV, and the Bongo EV this year. To this end, Hyundai Motor Group Chairman Chung Eui-sun reportedly met with CATL CEO Zeng Yuqun in November 2022 to discuss strengthening cooperation between the two companies.
Hyundai Motor Group will increase the use of Chinese batteries because U.S. IRA issues have fueled the need to diversify its battery suppliers.
In order to secure at least one electric vehicle model that qualifies for the IRA subsidy program, Hyundai Motor Group even decided to produce an electric vehicle version of the Genesis GV70, but it was eventually excluded from the subsidized model list. The electric vehicle version of the Genesis GV70 is produced at Hyundai Motor’s Alabama plant in the United States. Batteries for the model made by SK On, a Korean battery maker, were made in China up to the battery cell stage and then were installed in the electric vehicle version of the GV70 in South Korea. Therefore, the electric vehicle model fails to meet the IRA’s key mineral requirements.
Hyundai Motor Group plans to maximize the use of batteries produced in the United States in the North American market and load Chinese batteries into electric vehicles to be sold in Korea, China, and Europe.