Hyundai’s New Georgia Plant Could Build 500,000 EVs A Year

Business

Not many automakers use construction equipment manufactured by another arm of their parent company in the construction of a new electric vehicles factory. But that’s what Hyundai is about to do outside Savannah, Georgia, where the company held a groundbreaking ceremony Tuesday morning.

The Georgia plant was originally announced in May. Today, the principal players – including Hyundai global president José Muñoz, the governor of Georgia, Georgia’s two senators and other dignitaries – took time to symbolically lift the first shovels of dirt. Governor Brian Kemp called the $5.5-billion Metaplant, “Georgia’s largest economic development project ever.”

Hyundai currently builds electric vehicles like the Ioniq 5 in Korea and produces non-plug-in models – the Elantra, Santa Fe, Tucson and Santa Cruz – at its factory in Montgomery, Alabama. That factory has an annual capacity of around 400,000 vehicles. The new Savannah Metaplant will start producing electric vehicles in January 2025 – possibly earlier – and will be able to make 300,000 EVs a year when it completes its Phase One targets. During a roundtable discussion with journalists, Muñoz said the plant would hit 500,000 EVs a year in Phase Two, if demand is there. Muñoz said the Savannah plant would build EVs for all three Hyundai Motor Group brands – Hyundai, Kia and Genesis – and expects to build five or six models there when production gets going.

As mentioned above, EV production could start in Savannah before the January 2025 target date. Muñoz said the plant could even be pushed to start building vehicles in the third quarter of 2024. The Inflation Reduction Act (IRA) recently made significant changes to consumer EV incentives, and Hyundai EVs no longer qualify for the $7,500 tax credit. The IRA puts pressure on automakers to build EVs in the U.S. as soon as possible, but even if Hyundai can start production early, it won’t help because the automaker won’t start producing batteries in Georgia until March 2026.

“The batteries need to have the components sourced in [the United States, Mexico or Canada],” Muñoz said. “So, unless there is a change in our vehicles, they would not qualify till March 2026, when the vehicle and the batteries will be ready. Unless something else happens.”

That last line is key. Hyundai is working with the governments of South Korea and the U.S. to make changes to the IRA so that Hyundai EV buyers can get the tax credit. Hyundai’s Savannah announcement was timed with President Joe Biden’s visit to South Korea in May when he told the automaker that the U.S. would not turn its back on the Georgia plant. The IRA, which became law in August created a surprise stumbling block, one Muñoz said the parties are now discussing removing. Muñoz said one possible path is a legal challenge that finds the IRA violates trade agreements between the U.S. and South Korea. Another would be to create a grace period for automakers who are working towards the IRA’s goals of building more advanced vehicles in the U.S.

“A simple [solution] for us would be to give us a transition period, ideally until the moment when the battery electric joint venture will be built,” Muñoz said. Hyundai announced its plans well before the IRA became law and signed an economic development agreement [EDA] with the State of Georgia before the IRA took effect. If the company cannot meet its EDA’s production or employment targets, it will be hurt twice: once by penalties that come with missing EDA targets and then again by not having cars that consumers can get tax credits for.

“If, say, all companies who have an EDA agreement signed with any state in the United States to make a similar project, they get a transition period within which the cars that we bring in from other sources still qualify, that would be a perfect solution,” Muñoz said.

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