U.S.-China divide creates fast lane for Hyundai

3 minute read

Hyundai Motor Group Chairman Euisun Chung delivers remarks along with U.S. President Joe Biden on the automaker’s decision to build a new electric vehicle and battery manufacturing facility in Savannah, Georgia, as Biden ends his visit to Seoul, South Korea, May 22, 2022. REUTERS/Jonathan Ernst

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HONG KONG, May 23 (Reuters Breakingviews) - Hyundai Motors is getting a lift from closer U.S.-South Korea ties. Last week, President Joe Biden kicked off his inaugural trip to Asia in Seoul, signaling deeper economic and military cooperation between the allies. His counterpart, recently elected President Yoon Suk-Yeol, will benefit from less reliance on China for trade. The prize for Hyundai and peers will be a bigger presence in American markets.

As part of Washington’s campaign to shore up supply chains and compete with China, Biden courted corporate leaders from Samsung Electronics’ (005930.KS) Jay Y. Lee to Euisun Chung of Hyundai Motors. On Sunday, the U.S. president personally thanked the third-generation heir of South Korea’s largest automaker for plans to invest more than $10 billion stateside by 2025, including a $5.5 billion electric-vehicle factory in Georgia. Chung also added he was keen to collaborate with American firms in areas like robotics and autonomous driving.

Yoon, who has criticised his predecessor’s strategic ambiguity between Beijing and Washington and campaigned on better ties with the latter, will be keen to see Hyundai and peers chase growth in America. Though South Korea’s biggest trading partner is still China, local brands have floundered in the People’s Republic since diplomatic relations between the two sides soured in 2017. The world’s biggest car market barely factors into Hyundai Motor Co’s (005380.KS) sales these days: its market share was just 2.4% last year, down from nearly 8% in 2016, per S&P Global.

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It helps that Chung’s ambitions align with Biden’s. Hyundai’s listed unit aims to sell 1.9 million battery electric vehicles annually by 2030 and wants to account for 7% of global market share, compared with 2.6% in 2022, per Bernstein. At the same time, the U.S. president wants half of all new vehicles sold in America to be battery-powered by 2030.

Others will tag along. Last year, Biden helped tease out a deal between battery makers LG Energy Solution (373220.KS) and SK Innovation (096770.KS), which were embroiled in a bitter legal dispute in American courts. The deal helped keep both Korean manufacturers on U.S. soil, easing concern that automakers could become too dependent on Chinese suppliers. Samsung, the world’s largest memory-chip maker, is also building a $17 billion semiconductor plant in Texas. As Biden and Yoon grow closer, South Korea Inc will be happy to play third wheel.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

- U.S. President Joe Biden began his inaugural trip to Asia on May 19 with a visit to South Korea.

- On the same day, he visited a Samsung Electronics semiconductor plant. The president was accompanied by the company’s Vice Chairman Jay Y. Lee after the executive was excused from attending an accounting fraud trial.

- Biden also met with Hyundai Motor Group Chair Euisun Chung on May 22 in Seoul to thank him for a major investment in the state of Georgia.

- Hyundai Motor Group said on May 22 it will invest $5 billion in the United States by 2025 to strengthen collaboration with U.S. firms in advanced technology. On May 19, the group also announced plans to invest $5.5 billion in Georgia to build electric vehicle and battery facilities.

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Editing by Robyn Mak and Thomas Shum

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