Kia steps up electrification efforts with higher sales targets

Kia Corp., under South Korea’s Hyundai Motor Group, is gearing up to produce even more electric and other eco-friendly vehicles in the coming years than it had previously planned, bringing forward production schedules and expanding its manufacturing base to the US, Europe and India.

On Wednesday, the country’s No. 2 carmaker revised its EV production targets sharply higher than estimates released last year as it is on track to post its highest-ever profit in the first quarter.

Particularly, its updated EV sales goal for 2030 is as much as 33% higher than the previous target. By comparison, its forecast for overall car sales in 2030 was revised upwards by 7.5%.  

“We’re considering producing as many as five EV models in the US,” Kia Chief Executive Song Ho-sung told analysts and shareholders during its 2023 CEO Investor Day.

To that end, it plans to complete its first EV plant in the US state of Georgia by next year, thus ahead of schedule.

The new factory has been jointly under construction with its affiliate Hyundai Motor Co. and has an annual capacity of 300,000 units.

The move is aimed at complying with the US Inflation Reduction Act, which requires EV makers to meet sourcing requirements for batteries and their raw materials to qualify for tax credits there.

 
“We’re in discussion with battery companies to set up a joint venture (in the US),” said Song. “We’ll be able to come up with detailed plans by 2026.”

His remarks came after it posted its strongest car sales at home in the first quarter, along with Hyundai Motor. Their combined US sales in the January-March period also reached an all-time high for the first quarter, driven by eco-friendly models.

In 2022, eco-friendly vehicles accounted for 17% of Kia’s overall sales. They are expected to make up over half of its overall sales of an estimated 4.3 million units by 2030, including 1.6 million EVs, according to the company.

The revised sales target of 4.3 million units for 2030 as a whole is a 34.4% increase from this year’s estimated sales of 3.2 million units.

FULL EV LINEUP

Kia plans to build its full EV lineup composed of 15 models by 2027, starting with its second all-electric sport utility vehicle (SUV) EV9. The new SUV will go on sale from next month.

To scale up EV production, Kia will also speed up the transformation of some of its domestic facilities into EV production lines in Gwangmyeong near Seoul.

It will manufacture two EV models there from next year, maximizing its production capacity of 150,000 units per year.

“We need to transform other plants into EV lines over the medium to long term to meet the growing demand,” said a Kia official. “We’ll accelerate such efforts.”

It is also working to diversify its production base to Europe and India, where it will churn out EVs from 2025.

Kia will unveil three EV models this year: the before-mentioned EV9 in May; the Ray EV based on the Ray compact car in August; and the EV5, exclusively for Chinese drivers, in November.

Previously, it had planned to unveil only two EV models a year.
 

CHALLENGE TO TESLA, BYD

Buoyed by brisk first-quarter sales, Hyundai Motor is expected to follow suit with bullish sales goals for the years ahead. If it revised its 2030 sales target by double digits as was done by Kia, their combined EV sales could reach 4 million units by 2030.

That may be enough to challenge China’s BYD Co. and Tesla Inc. The world’s two largest EV makers produce more than 3.2 million EVs in aggregate per year.

FINANCIAL TARGETS

Kia’s 2030 revenue target of 160 trillion won ($122 billion) represents an 84% surge from its 2022 results. EVs will likely account for 53% of its revenue by 2030, versus 5% in 2022.

Operating profits are forecast to surge 122% to 16 trillion won during the period. The estimated operating margin is 1.6 percentage points higher than its previous estimate.

To make EVs affordable, Kia plans to lower battery procurement costs by 10% from the current level and by an additional 30% by 2030.

In line with such efforts, the carmaker will spend a total of 32 trillion won on capital expenditures by 2027, starting this year. Future businesses will account for 45% of the investments.

AUTONOMOUS DRIVING CARS

Kia’s flagship EV model EV9 features Level 3 autonomous driving, allowing drivers to take their hands off the steering wheel in a limited driving range.

By 2026, the electric SUV will come with an eyes-off driving function, meaning drivers do not need to remain attentive to the road in certain circumstances.

All Kia cars to be rolled out after 2025 will be equipped with over-the-air connectivity technology to offer wireless download services for applications, software and data.

Last year, Kia sold 487,000 units of eco-friendly cars, including EVs, making up 17% of its total sales. The proportion nearly tripled from 6% in 2019.

Moreover, the sales growth of the eco-friendly models accelerated to 54.8% on-year in 2022, far outpacing the 4.6% growth in its car sales as a whole. 

Write to Nan-Sae Bin and Il-Gue Kim at binthere@hankyung.com

Yeonhee Kim edited this article.