Published on August 3rd, 2020 |
by Steve Hanley
August 3rd, 2020 by Steve Hanley
We heard it for almost a decade, the high pitched wail of executives at traditional car companies telling us, “Nobody wants to buy an electric car.” Then the Tesla Model 3 came on the market and the tune changed. Suddenly, it seemed everybody wanted to buy an electric car. Volkswagen, spurred on by the horror of its own diesel cheating scandal, was the first global car company to put its shoulder to the wheel and begin a full transition to electric cars. Now it seems Hyundai and corporate cousin KIA will be the next automaker to take the plunge.
According to a report by Reuters, the South Korean company plans to introduce two production lines dedicated to manufacturing electric vehicles — one next year and another in 2024. Reuters says the information is contained in an internal union newsletter viewed by its reporters.
A Meeting In May
Reuters says Euisun Chung, the head of Hyundai Motor Group, held a series of meetings beginning in May with his counterparts at Samsung, LG, and SK Group, makers of batteries and electronic parts. The purpose of the discussion was to insure Hyundai and KIA have an adequate supply of batteries and other electronic bits as they ramp up the production of electric cars. On July 14, Chung announced that Hyundai Motor Group intends to sell 1 million electric cars a year by 2025. (Tesla intends to be selling many times that number of electric cars by then.)
A senior Hyundai insider, who preferred to remain anonymous, said the company had not been concerned about Tesla when the Silicon Valley company was producing high-end cars. But it became more worried when Tesla introduced the less expensive Model 3 in 2017, a move the person described as a “strategic victory.”
The latest sales numbers in South Korea have also been alarming for Hyundai executives. In June, the Tesla Model 3 outsold the Hyundai Kona Electric, a shock in a country where consumers are presumed to have a strong preference for domestically produced products. “Hyundai did not expect Tesla to dominate the EV market so quickly,” another person familiar with the company’s thinking told Reuters.
Getting The Union On Board
One issue that has to be resolved in order for Hyundai to make the transition to manufacturing electric cars possible is to convince the union whose workers build Hyundai and KIA automobiles to support the move. Not surprisingly, union officials are concerned about preserving the jobs of their members, as many parts for electric cars are purchased from outside suppliers while most of the parts for conventional cars are manufactured in-house.
The union is asking the company to assemble key EV components like battery packs and motors internally to help reduce any job losses. “We are not opposed to EV business. Kodak went bankrupt because it stuck to film even as the industry was shifting to digital photography,” union spokesman Kwon Oh-kook told Reuters. “We just want to protect the jobs of our members.”
Hyundai Closes The Circle On EVs
Hyundai dipped a toe in the water on electric cars in 2010 when it made 230 electric cars for the government. Those cars ended up in storage at a research center outside Seoul due to a lack of charging infrastructure, according to Lee Hyun-soon, Hyundai’s head of research and development at the time.
Then Hyundai went off on a hydrogen fuel cell flyer for a few years, following the lead of Toyota and Honda. That fuel cell escapade cost all those companies years of EV development time while Tesla got its act together and took off in most spectacular fashion. The question now is whether Hyundai can ever recapture the lead it squandered and become a major player in the electric car space.
The EVs it does produce — the Ioniq and Kona — are very nearly the equal of Teslas when it comes to efficiency, squeezing as many miles per kWh out of its cars as possible. For the past 15 years, Hyundai styling has been some of the best in the business. Its reputation for reliability and quality is also first rate, often surpassing the likes of Mercedes-Benz and other premium carmakers. And its 10-year, 100,000-mile warranty is the gold standard of the industry.
However, its electric car offerings have been constrained by not having enough batteries available to meet the demand. Even now, its production target for the new Hyundai NE electric car is well under 100,000 units per year. That’s barely enough to keep the doors of a modern auto factory open, although adding in the KIAs built on the same line will help somewhat.
But now Hyundai says it’s ready to get serious about building electric cars. Bringing a second EV production facility online in 2024 hardly seems acceptable, not when Tesla is bringing new factories online in a matter of months in Germany and Texas. There is even a rumor Tesla might consider building a new factory in South Korea itself someday soon.
The news that the leaders of the company are now fully committed to the EV revolution is all well and good. Now let’s see how those same leaders do at translating that plan into action.
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