Hyundai bolsters US presence with $5bn EV battery venture

South Korea's Hyundai said on Tuesday it had finalised a $5bn (R91bn) electric vehicle (EV) battery joint venture in the US, boosting electrification efforts in its largest market.

Hyundai also reported its first-quarter net profit had more than doubled, exceeding expectations. Its shares rose as much as 5% to a seven-month high after the announcements, and as the carmaker also initiated steps to improve shareholder returns.

Hyundai and partner SK On, a battery unit of SK Innovation, will set up a new battery manufacturing plant in the state of Georgia, the companies said, formalising an earlier provisional agreement.

The move follows new US sourcing requirements for EV battery components and critical minerals in order for car buyers to qualify for up to $7,500 ( R136,667) in credits under the Biden administration's Inflation Reduction Act (IRA). Cars made by Hyundai and sister company Kia are currently not eligible for the tax credits.

The announcement was made as South Korean President Yoon Suk Yeol is in Washington to meet President Joe Biden on the first state visit to the US by a South Korean leader in 12 years. Accompanying Yoon on the trip are top executives of some of South Korea's biggest companies, including Hyundai executive chair Euisun Chung.

Rivals General Motors and Samsung are also set to announce plans to build a joint venture EV battery manufacturing plant in the US, sources said.

The Hyundai-SK On Georgia plant is expected to start manufacturing battery cells in the second half of 2025 with an annual production capacity of 35 GWh, sufficient to support the production of 300,000 EVs.

Hyundai, which makes the Tuscon sport-utility vehicles (SUVs) and the Elantra sedans, reported a net profit of 3.3 trillion won (R45bn) for the January-March period versus a profit of 1.6 trillion won (R21.8bn) a year earlier, thanks to a rise in vehicle output as a global chip shortage eased and demand for its high-margin SUVs remained strong.

That compared with a Refinitiv SmartEstimate for first-quarter profit of 2.3-trillion (R31.3bn) won from 16 analysts.

“On top of strong car demand, raw material costs have continued to stabilise and drop since late last year, helping Hyundai achieve better profitability,” said Lee Jae-il, an analyst at Eugene Investment & Securities.

Hyundai and Kia cars are competitive in the US, based on their prices and a favourable exchange rate, he added.