Hyundai commits $17 billion to add electric, driverless cars

Hyundai commits $17 billion to add electric, driverless cars
Hyundai unveiled the Vision T plug-in hybrid SUV concept at the 2019 AutoMobility L.A. auto show last month. The automaker, which operates a U.S. plant in Montgomery, has said it plans to invest $17 billion over the next six years to add electric and driverless vehicles to its lineup. (Hyundai Motor Co.)

Hyundai Motor Co. will spend $17 billion over the next six years on new technology to help make the switch to electric and autonomous vehicles.

Announcing its strategic plan through 2025, the South Korean company pledged to spend almost half the money on electrification. Autonomous driving will soak up $1.3 billion of the total, Hyundai said. The remaining investment will focus on artificial intelligence, robotics, personal air vehicles (PAV) and new energy technologies.

Hyundai said its goal is to electrify most new models by 2030 in key markets such as Korea, U.S., China, and Europe, with emerging markets such as India and Brazil following suit by 2035.

The investment is part of a surge in spending by Hyundai, which, like rivals worldwide, faces an expensive future of lower-emissions, battery-powered vehicles. Competitors such as Volkswagen have pledged tens of billions of dollars in electrification investments.

If successful, the Hyundai plan would create a more profitable business with a global market share of 5% in 2025, up from 4% in 2018, according to Hyundai. Yet most traditional carmakers are heading in the same direction, and all-electric rivals such as Tesla have a technological head start. That suggests competitive pressures aren’t likely to subside in the next era.

German carmakers are set to invest $45 billion in electric vehicles over the next three years, while General Motors is pushing ahead with a plan to sell 20 different EV models by 2023.

Hyundai said it should be more than three times as profitable by the end of the six-year plan.

Hyundai wants to widen its operating margin to 8% in 2025 – up from 2.5% last year – a level that would make it among the most profitable carmakers. BMW has a margin of 9.3% and Toyota 8.2%, according to Bloomberg, with most other global automakers in the 2%-6% range.

Global sacrifice

The Hyundai transformation will come at a price. Some $23 billion will be stripped out of the company in the next three years, Hyundai said.

The interior of a Hyundai Motor Co. Nexo autonomous fuel cell electric vehicle is seen in Pyeongchang, Gangwon Province, South Korea, on Tuesday, Feb. 20, 2018. (SeongJoon Cho/Bloomberg)

That’s part of the sacrifice being made at automakers across the world as the industry tackles a tectonic shift in technology. At the same time, trade-war tariffs hang over decades-old supply chains that serve a dwindling market.

All told, carmakers are cutting more than 80,000 jobs in coming years, according to Bloomberg. The industry will produce 88.8 million cars and light trucks this year, an almost 6% drop from a year ago, according to researcher IHS Markit.

Hyundai said it plans to buy back $258.2 million of shares by March 2020.

 

 

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