Hyundai to build Santa Fe hybrid at Alabama plant ahead of schedule

South Korea’s top automaker Hyundai Motor Co. will manufacture a hybrid version of its signature SUV, the Santa Fe, in Alabama, earlier than planned as the Joe Biden administration beefs up its policy efforts to roll out more eco-friendly cars in the US.

The move is also designed to offset the expected decline in sales of Hyundai’s electric cars in the US where carmakers will be ineligible for state subsidies for electric vehicles made outside North America.

According to industry officials on Tuesday, the Korean carmaker will start production of its hybrid Santa Fe model at Hyundai Motor Manufacturing Alabama LLC (HMMA), located in Montgomery, in September, a month ahead of schedule.

The production of the Electrified GV70, Hyundai’s latest model under its standalone premium brand Genesis, at the Alabama plant will start in December as previously announced for delivery to US consumers early next year.

HMMA, Hyundai’s first assembly and manufacturing plant in the US, currently assembles Sonata and Elantra sedans, Santa Fe and Tucson SUVs, and the Santa Cruz Sport Adventure Vehicle.

The addition of the Electrified GV70 and the Santa Fe Hybrid marks the beginning of Hyundai’s electric vehicle production in the US. The company has so far produced the vehicles at its main plant in Korea and exported them to the North American market.

HYBRIDS MORE PROFITABLE THAN ELECTRIC CARS

Analysts said Hyundai is moving up its schedule for the Santa Fe hybrid to give it more time ahead of its planned production of EVs in the US.

“As the industry’s transition to electric vehicles is taking longer than expected, hybrids will account for 10.6% of all cars sold globally in 2026,” said Daol Investment & Securities analyst Yoo Ji-woong. “In the near term, hybrids will be more profitable than EVs for Hyundai.”

Hyundai and its affiliate Kia Corp. saw their August car sales rise to record highs in the US last month, driven by green cars.

Sales of their entire eco-friendly cars, including hydrogen vehicles and hybrids, stood at 14,903 units, up 79.3% from August of last year.

Hyundai and Kia are among the automakers with the most to lose from new legislation – the Inflation Reduction Act – which was signed into law last month, halting subsidies for EVs and batteries made outside the US.

All of the Hyundai IONIQ 5 and Kia EV6 models are manufactured in Korea and exported to the US.

Hyundai Motor, which is building a $5.5 billion EV plant in the US state of Georgia, is also in talks with LG Energy Solution Ltd. to launch a battery plant there.

If the battery JV plant breaks ground this year, it can start production as early as 2025, industry officials said.

MOVES TO COUNTER IRA

Global automakers and battery manufacturers are taking various measures in response to the US EV tax benefit act favoring US-based companies.

While Tesla Inc. plans to build a lithium refining plant in Texas, German carmaker Mercedes-Benz recently signed a contract to buy 10,000 tons of lithium a year from Rock Tech Lithium Inc., a Canadian mining company.

Japan’s Toyota Motor Corp. has decided to invest 325 billion yen in the construction of a battery plant in the US. Panasonic Holdings Corp. also plans to spend $4 billion to build its third US battery plant.

Meanwhile, Chinese battery makers, the US IRA’s primary target, are favoring the European market over North America.

Contemporary Amperex Technology Co. Ltd. (CATL), which initially planned to build a battery plant in Mexico, is now looking to build a plant with an annual capacity of 1,000 GWh in Hungary. Its German factory will start mass production from the end of this year to supply cylindrical batteries to BMW.

China's SVOLT Energy Technology recently said it will build a 16GWh plant in Berlin, Germany.

Write to Hyung-Kyu Kim and Il-Gue Kim at khk@hankyung.com
In-Soo Nam edited this article.