Hyundai Motor Co. and its smaller affiliate Kia Motors Corp. will increase their investment in the U.S. by 50 percent over the next five years to US$3.1 billion (3.63 trillion won).
Chung Jin-haeng, president of Hyundai Motor, said on January 17, “Hyundai-Kia Motors also has plans to invest in the U.S. market just like any other automakers. We will invest about US$3.1 billion (3.63 trillion won) in the next five years.” The planned U.S. investment by South Korea’s two largest automakers is over US$1 billion (1.17 trillion won) more than the US$2.1 billion (2.46 trillion won) they spent in the previous five-year period. Hyundai-Kia Motors said that a significant portion of the planned investment would be devoted to R&D and, in particular, to developing self-driving and eco-friendly technologies. Some money would also be spent on upgrading and retooling existing production lines and production and sales corporations.
The group is also considering building a new factory in the U.S. Chung said, “When the demand for cars increases in the North American market, including the U.S., in the future, we can build a new factory. We may produce SUVs, which is in high demand, and our upscale Genesis vehicles there.”
Although the group denies it, such decision is considered a response to the pressure from President-elect Donald Trump. Trump threatened to slap 35 percent taxes on Mexican-built vehicles imported into the U.S. using the North American Free Trade Agreement (NAFTA). In response, Ford and Fiat Chrysler Automobiles (FCA) of the U.S. and Toyota and Honda of Japan announced their plans to invest trillions of won in the U.S. before and during the Detroit motor show. Chung said the group has no additional plans to invest in Mexico and will not transfer production or jobs from the U.S. to Mexico.
Last year, Hyundai-Kia Motors sold a total of 1.42 million units in the U.S., up 2.5 percent from 1.39 million units a year earlier. The sales of Hyundai Motor and Kia Motors surpassed 770,000 and 640,000, respectively. Hyundai Motor has seen its sales in the U.S. market increase for seven years in a row. Hyundai Motor has a production plant in Alabama, while Kia Motors has it in Georgia. In the U.S. market, SUVs are very popular. In fact, the Hyundai Tucson sold 89,713 units last year, showing a 41 percent increase from a year ago. The sales of the Kia Sportage and the Kia Carnival also rapidly grew by 50.9 percent and 20.4 percent, respectively.
However, the production lines of Hyudai-Kia Motors are focused mainly on sedans. In addition, Hyundai Motor produces about 100,000 Santa Fe crossovers at a Kia Motors plant in Georgia on consignment, but Kia Motors is trying to reduce the amount. In order to meet the growing demand of SUVs, it is urgent for Hyundai Motor to improve its production facilities. The first investment of Hyundai-Kia Motors in North America will be focused on this sector.
The group is also expected to make aggressive investment in environmentally friendly and autonomous vehicles in its bid to make the best use of the U.S. market which has relatively lax regulations. Hyundai-Kia Motors plans to release more than 14 types of eco-friendly cars by 2020. So, it needs to make heavy investment in the sector. In particular, the group is jointly developing “Hyper-connected Intelligent Car,” which is to determine supremacy in the future car market, with American networking giant Cisco.
Hyundai-Kia Motors is considering a new plant, but the group will make a final decision on the details, such as production capacity, location and builder, through a scrutiny since demand in the local market and situations at home and abroad can act as variables.
As even Hyundai-Kia Motors has joined a growing list of automakers announcing investments in the U.S., industry sources say that Trump’s hefty tax threats worked. Previously, Toyota announced it would sink US$10 billion (11.7 trillion won) into the U.S. market over the next five years, while FCA, Ford and Mercedes-Benz announced to additionally invest US$1 billion (1.17 trillion won), US$700 million (819 billion won) and US$1.3 billion (1.52 trillion won), respectively, by 2020.