Hyundai to invest $51.81b for electric, autonomous vehicles

Hyundai Motor plans to invest about 61.1 trillion won ($51.81 billion) between 2020 and 2025, the company said on Wednesday, with the expenditure mainly focused on electric and autonomous vehicles, but analysts want to see it deliver.

The South Korean car maker unveiled a “Strategy 2025” roadmap that envisages annual average spending of 10 trillion won, exceeding that of previous years, and up from a 2018 figure of 6.1 trillion won.

Shares in Hyundai rose as much as 2% on the news, only to give up most of their gains by the close of trade, with analysts waiting to see how its intentions translate into action.

“Its announcement of investment plan and goals is full of good words, but not real results yet,” said Lee Han-joon, an analyst at KTB Investment & Securities. “The plan itself also wasn’t an amazing one.”

South Korea’s top automaker is accelerating efforts to catch up in the race to bring self-driving cars to market.

Hyundai Motor is also looking at developing flying cars, which could be commercialised ahead of the most advanced self-driving cars, its executive vice chairman, Euisun Chung, has said.

Ensuring survival is a key task as the auto industry’s shift towards zero-emission and self-driving technology requires massive investment at a time of profit pressured by slowing growth, Hyundai said in a presentation to investors.

Hyundai aims to devote about 20 trillion won of the total investment, spread across six years, to future technologies.

It also set an ambitious deadline of 2025 to place itself among the world’s top three makers of battery and fuel cell vehicles, with annual sales of 670,000 electric vehicles, including 560,000 battery-based cars.

Hyundai plans to cut raw material costs by 34.5 trillion won through 2022.

“So, the goal is set, now results should be good, with good products being delivered,” said Kim Jin-woo an analyst at Korea Investment & Securities.

“That’s when investors will make a decision about their bets on Hyundai.”

Meanwhile, Hyundai has signed a preliminary deal to build a new factory in Indonesia, which would be its first car plant in Southeast Asia and a crack at Japanese rivals that dominate the market.

The deal comes as Hyundai and affiliate Kia Motors struggle with a prolonged sales downturn in China, where they suspended two factories this year.

Hyundai Motor said it will invest about $1.55 billion in the Indonesia auto manufacturing plant from now until 2030, including product development and operation costs.

The facility, to be built in the city of Bekasi, east of Jakarta, will start production in late 2021, with an annual capacity of 150,000 vehicles and a plan to grow that to 250,000 vehicles a year, Hyundai said.

Hyundai plans to make small sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs), while electric vehicles (EVs) tailored to Southeast Asian market are under consideration.

Hyundai said it is building the production facilities to avoid import tariffs ranging from 5% to 80% in the ASEAN region. The plant will cater to Indonesia, the region’s largest automobile market, and other countries belonging to the Association of Southeast Asian Nations (ASEAN), it said.

The plant will allow the automaker to secure future growth to help it “combat slowing demand in the global automotive market”, Hyundai said in its statement.

The deal was signed at an event attended by Indonesian President Joko Widodo and Hyundai Motor Executive Vice Chairman Euisun Chung. Widodo is in South Korea for a meeting of ASEAN leaders hosted by South Korean President Moon Jae-in.

Moon has been pushing a “New Southern Policy” aiming to deepen ties with Southeast Asia as Seoul seeks to curb its reliance on traditional trading partners like China and the United States. Hyundai is far behind Japanese rivals in Southeast Asia, with its sales reaching 122,883 vehicles versus Toyota’s 854,032 from January to September this year, according to research firm LMC Automotive.

LMC Automotive forecast a 4% year-on-year decline in total vehicle sales in the ASEAN region in the fourth quarter, partly because the slowdowns in the Thai and Indonesian economies show no signs of abating.

Hyundai said key ASEAN countries including Indonesia, Thailand, Malaysia, Vietnam and Singapore are expected to see combined vehicle sales grow to 4.49 million units in 2026, from 3.16 million in 2017.

Reuters