Hyundai showed another strong performance in the third quarter, with several popular electric vehicle models driving electric vehicle sales up 27%. Still, analysts say that with new tax credit provisions in the Inflation Reduction Act, a drop in demand “seems inevitable” for foreign automakers such as Hyundai Group.

Despite the plans start construction at its first electric car plant in the United States this month, Hyundai is among the automakers that will lose the right for their electric models to qualify for the electric car tax credit, under current rules.

Hyundai declared her intentions to build a dedicated electric car plant in the United States in May, but after the Inflation Reduction Act was passed in August, the automaker shortened its timeline.

Construction on the plant was originally planned to begin in early 2023, but the South Korean automaker warned that US EV tax rules could affect business.

Jose Munoz, global president and chief operating officer of Hyundai, spoke at the Reuters Automotive Conference, emphasizing the importance of the tax credit for electric vehicles.

It will be very, very astronomical if nothing happens, if nothing changes. The impact is huge. That’s why we operate on all channels.

Meanwhile, Hyundai Group including Kia and Beingis ramping up electric vehicle production on its way to becoming the second largest electric vehicle seller in the first half of 2022, behind only Tesla.

High-flying Hyundai IONIQ 5 and Kia EV6 lead with 3.2% and 3.0% of the total The US electric vehicle market this year to date. By the end of the third quarter, however, the South Korean automaker saw sales of electric vehicles decline as the federal tax credit expired.

Hyundai IONIQ 5 Source: Hyundai

Hyundai Q3 earnings, electric vehicle sales and guidance

Hyundai edition IONIQ 6 and Genesis GV60 helped increase overall sales, with electric vehicles accounting for more than 5% of Hyundai Group’s total sales.

Despite the fact that sales of Hyundai electric cars grew by 27% in the third quarter 2022, several analysts question whether the South Korean automaker will be able to maintain its momentum in the United States without the help of the tax credit.

In the US market, the IONIQ 5 dropped from 1,516 sales in August to 1,306 in September, a decline of about 14%.

Lee Jae-il, an analyst at Eugene Investment & Securities, elaborated on the implications, stating:

The impact of the Anti-Inflation Act on Hyundai’s electric car sales in the US market seems inevitable, as incentives for electric cars are a key driver for electric car buyers in the US.

Aside from Hyundai’s electric cars, the automaker’s total sales rose 30.6% from 2021, but net profit fell more than 52% due to recalls due to engine problems that cost the company more than $900 million .

Looking ahead, Hyundai expects sales revenue to grow 19 to 20%, compared with previous guidance of 13 to 14%. At the same time, the automaker cut expected vehicle sales from 4.32 million units to 4.01 million due to higher input costs and persistent supply chain bottlenecks.

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