Hyundai increases its EV investment to $28 billion in order to reduce China operations

Hyundai Motor will further restructure its struggling China business and increase its average annual investment in electrification by nearly two thirds, spending $28 billion over the next decade as part of a strategy to increase sales of electric vehicles (EVs).

The South Korean automaker, which is the No. 1 in the world, held its annual investor day on Tuesday. Together with its affiliate Kia (000270.KS), the 3 auto group by sales stated that it had also increased its EV sales target to 2 million units by 2030 from 1.87 million.

It would account for about a third of its total vehicle sales, which is an increase from the 8% expected this year.

In a statement, Hyundai Motor stated, “With global EV demand growing faster than market forecasts, Hyundai Motor is raising its 2030 sales target.”

Hyundai (005380.KS) intends to increase local EV production in its three primary markets, the United States, Europe, and South Korea, in order to achieve the goal. This will be done in response to the expansion of incentives for locally manufactured vehicles.

By 2030, from 0.7% currently, EV production will account for three-quarters of its total vehicle production in the United States, its largest market.

According to Jaehoon Chang, the CEO of Hyundai Motor, the company will think about making its vehicles more compatible with the charging standard that Tesla (TSLA.O) is pushing in North America.

Hyundai announced that it would further restructure its struggling China business to focus on profitability while simultaneously raising EV sales targets in its major markets.

Chang informed investors that the automaker faced the greatest risk because it had lost market share to domestic rivals in China, the largest vehicle market in the world, prior to 2016.

In 2021, Hyundai sold one China plant and plans to sell two more, including one it planned to close this year and one it planned to close last year. The remaining two plants will be used for exports to emerging markets after further rationalization.

It will also reduce the number of products it offers in China from 13 to 8, concentrating on high-end and SUV models, including the Genesis luxury brand.

To upgrade its seriousness in batteries and foster cutting edge batteries, Hyundai plans to contribute 9.5 trillion won ($7.4 billion) over the course of the following 10 years.

Hyundai stated that it intends to launch competitive lithium-iron-phosphate (LFP) batteries for the first time in 2025. LFP batteries are a less expensive alternative to lithium ion batteries, which have helped China adopt electric vehicles.

Last week, its larger rival Toyota (7203.T) also announced plans to use LFP batteries.

By 2028 and beyond, Hyundai intends to source more than 70% of its batteries from joint ventures. To ensure a consistent supply, other plans include collaborating with startups and specialized businesses as well as forming joint ventures with battery manufacturers.

The company stated, “Joint research and equity investment in startups to accelerate the development of next-generation batteries is also under way.”

By 2030, Hyundai said, it wanted to have an operating profit margin of at least 10% in the EV business.

Hyundai intends to spend 109.4 trillion won up until 2032, which includes a $35 billion investment in electrification.