SEOUL, April 25 (Reuters) – South Korea’s Hyundai Motor Co ( 005380.KS ) said on Tuesday it had finalized a $5 billion electric vehicle (EV) battery joint venture in the United States, boosting electrification efforts in its biggest market.
Hyundai also reported that its first-quarter net profit more than doubled expectations. Its shares rose as much as 5% to a seven-month high after the announcements, and the automaker began taking steps to improve shareholder returns.
Hyundai and partner SK On, the battery unit of SK Innovation Co Ltd ( 096770.KS ), will set up a new battery manufacturing plant in the state of Georgia, the companies formalized an earlier tentative agreement.
It follows new US sourcing requirements for EV battery components and critical minerals to qualify car buyers for up to $7,500 in credits under the Biden administration’s Inflationary Reduction Act (IRA). Cars made by Hyundai and sister company Kia Corp ( 000270.KS ) do not currently qualify for tax breaks.
The announcement came as South Korean President Yoon Suk-yeol was in Washington to meet US President Joe Biden on a state visit to the US in 12 years by a South Korean leader. Yoon was joined on the trip by top executives from some of South Korea’s biggest companies, including Hyundai Motor Group Executive Chairman Yuisan Chung.
Rivals General Motors Co ( GM.N ) and Samsung STI ( 006400.KS ) said they will invest more than $3 billion to build an EV battery manufacturing plant in a joint venture in the United States.
The Hyundai-SK On Georgia plant is expected to start producing battery cells in the second half of 2025 with an annual production capacity of 35 GWh, enough to support the production of 300,000 EVs.
Hyundai, which makes the Tucson sport-utility vehicles (SUVs) and Elantra sedans, posted a net profit of 3.3 trillion won ($2.47 billion) in the January-March period, up from 1.6 trillion a year earlier. A global chip shortage boosted auto production and strong demand for its high-margin SUVs.
That compares with a Refinitiv SmartEstimate of 2.3 trillion in first-quarter profit from 16 analysts.
“On top of strong car demand, raw material prices have been stable and falling since late last year, helping Hyundai achieve better profits,” said Lee Jae-il, analyst at Eugene Investment & Securities.
Hyundai and Kia cars compete in the U.S. based on their prices and favorable exchange rates, he added.
Seo Gang Hyun, head of Hyundai’s planning and finance division, said regular SUVs and luxury Genesis cars still account for the majority of the company’s U.S. sales.
“So I would say the impact of the deflationary bill is not going to be as substantial as you’re worried about,” he told analysts on an earnings call after being questioned about the issue.
Hyundai and Kia on Tuesday plan to invest 1.05 trillion won in autonomous driving company 42dot Inc to maintain control and boost its operational competitiveness.
($1 = 1,336.2400 won)
Reporting by Heekyong Yang and Joyce Lee; Editing by Christian Schmollinger
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