Georgia state to provide $1.6 bn in incentives to Hyundai

Hyundai Motor Group is expected to receive about $1.6 billion in incentives including tax breaks from Georgia as South Korea’s top automaker is set to build its first dedicated electric vehicle and battery manufacturing facilities in the US state.

The Georgia state government and the group agreed on incentives of some 2 trillion won ($1.6 billion), the authority’s largest benefit for a company, according to industry sources and media reports on Monday.

“They arranged incentive packages including free land, property tax cuts, additional tax reduction when meeting job creation targets, and financial support for job training,” said an industry source in South Korea.

The group on May 20 announced a plan to invest about $5.5 billion to build a new EV plant with an annual capacity of 300,000 units as well as a battery production complex in Bryan County, Georgia.

Earlier, Georgia commited to provide Rivian Automotive Inc., a US EV manufacturer, with a total $1.5 billion worth of incentives as the maker of R1T pickup trucks and R1S sport utility vehicles pledged to invest $5 billion in the state.

Hyundai is likely to receive better incentives than those for Rivian as the South Korean company’s investment and job numbers are higher than those of the US EV maker, sources in the state said.

US President Joe Biden also pledged not to disappoint Hyundai on May 22 after a meeting with group Chairman Chung Euisun, indicating large-scale incentives, although the size could shrink on possible opposition by US taxpayer groups and the midterm elections in November, industry sources said.

MOST BUSINESS-FRIENDLY STATE

Incentives were not the only factor leading Hyundai to select Georgia as the site for its dedicated EV production complex. Georgia is one of the most business-friendly states in the US.

Area Development, the leading US corporate site selection and facility planning resource, named Georgia No. 1 for business for eight straight years since 2014. Global information technology giants including Microsoft Corp. and Google have operations in the state, while South Korean companies such as SK On Co., the world’s fifth-largest EV battery maker, have also set up units there.

The Georgia Department of Economic Development offers a one-stop service for site selection, business permissions, links with infrastructure and incentive information, making the process for business establishment easy, experts said.

The state provides additional tax incentives to companies that use ports in Georgia and develop new products or services there, enticing more corporates.

“Higher population growth and a lower minimum wage compared to the US average are also attractive,” said Shin Jeong-su, the director-general of Korea Trade-Investment Promotion Agency’s (KOTRA) office in Atlanta.

LABOR UNION

Hyundai could have a bumpy road ahead, however, as the US Democratic Party is seeking legislation for a $4,500 tax credit for EVs made in a union plant proposed by the Biden administration. The existing US plants of the group’s carmakers - Hyundai Motor Co. and Kia Corp. – do not have unionized workers.

The group is likely hoping workers at the planned EV plant in Georgia won't set up a labor union. Georgia adopts a right-to-work law that gives workers the freedom to choose whether or not to join a union in the workplace.

“Hyundai will inevitably lose price competitiveness if the bill is passed as the Democratic Party seeks, which will remove an additional tax break,” said an industry source. “If the legislation goes through Hyundai may expect additional incentives as Biden is aware they won't benefit from the tax credit. ”

However, the group may allow workers to establish a union in the new factory, some sources predicted.

Write to Il-Gue Kim and Han-Shin Park at black0419@hankyung.com
Jongwoo Cheon edited this article.