Hyundai grew EV sales by 27% in Q3, but foreign automaker demand drop ‘seems inevitable’ in US

Hyundai delivered another strong performance in the third quarter as several popular EV models led to 27% EV sales growth. However, analysts believe with the new tax credit provisions from the Inflation Reduction Act, a drop in demand “seems inevitable” for foreign automakers like the Hyundai Group.

Despite plans to start construction on its first EV plant in the United States this month, Hyundai is one of the automakers that will lose eligibility for its electric models to qualify for the EV tax credit, according to the current rules.

Hyundai announced its intentions to build a dedicated electric vehicle facility in the United States in May, but since the Inflation Reduction Act was passed in August, the automaker has shortened its timeline.

The plant was initially slated to begin construction in early 2023, but the South Korean automaker has warned that the US EV tax credit rules can impact business.

Jose Munoz, global president, and chief operating officer at Hyundai, spoke at a Reuters Auto Conference, highlighting the significance of the EV tax credit.

It will be very, very astronomical if nothing happens, if nothing changes. The impact is huge. That’s why we’re taking actions through all the channels.

Meanwhile, the Hyundai Group, including Kia and Genesis, has been scaling EV production en route to claiming second place in terms of EV sales for the first half of 2022, behind only Tesla.

The high-flying Hyundai IONIQ 5 and Kia EV6 are leading the way with 3.2% and 3.0% of the overall US electric vehicle market this year to date. However, toward the end of the third quarter, the South Korean automaker saw its EV sales momentum slip as its federal tax credit expires.

Hyundai’s Q3 earnings, EV sales, and guidance

The release of the Hyundai IONIQ 6 and Genesis GV60 helped boost overall sales, with EVs claiming over 5% of the Hyundai Group’s total sales.

Even though Hyundai’s EV sales rose 27% in the third quarter of 2022, several analysts are questioning if the South Korean automaker can maintain its momentum in the United States without the assistance of a tax credit.

In the US market, the IONIQ 5 fell from 1,516 sales in August to 1,306 in September, down about 14%.

Lee Jae-il, an analyst at Eugene Investment & Securities, spoke about the impact, claiming:

The impact of the Inflation Reduction Act on Hyundai’s EV sales in the U.S. market seems inevitable as EV incentives are the key factor to U.S. EV shoppers.

Besides Hyundai’s electric vehicles, the automaker’s overall sales grew 30.6% from 2021, yet net profit plummeted over 52% due to recalls over engine issues that cost the company over $900 million.

Looking ahead, Hyundai expects between 19 to 20% sales revenue growth, up from the previous guidance of 13 to 14%. At the same time, the automaker lowered vehicle sales expectations from 4.32 million units to 4.01 million with higher input prices and ongoing supply chain bottlenecks.