Hyundai Motor to Launch First Hybrid Engine Production in the US... Overcoming Trump Tariffs [Trump 2nd Term D-3]

Response of Korean Industry to Trump’s Second Term
First Overseas Hybrid Engine Production
"Coexistence with Internal Combustion Engines Will Last Longer Than Expected"

Hyundai Motor Company has decided to directly produce hybrid engines in the United States. If carried out as planned, this will be the first overseas hybrid engine factory. While the company produces hybrid complete vehicles worldwide, hybrid engines have so far only been produced at factories in Korea and supplied to each complete vehicle plant.

As the second term of the Donald Trump administration is about to begin, the domestic industry is reorganizing its overall U.S. business operations, drawing attention to what ripple effects Hyundai Motor Group’s decision?given its significant local business presence?might bring.

On the 17th, according to a summary of Hyundai Motor’s labor union and industry reports, the company is undergoing internal review procedures regarding the plan to directly produce the Gamma hybrid engine, mainly used for small and medium-sized vehicles, locally in the U.S. Specific sites or scale have not yet been decided. Considering that the annual production volume of a single engine plant is typically around 200,000 units and that hybrid vehicle demand is expected to increase over the coming years, it is estimated to be a large-scale project.

Hyundai Motor Alabama Plant Production Line. Provided by Hyundai Motor Group

Among Hyundai’s overseas plants, several produce hybrid models, including those in the U.S., China, the Czech Republic, Indonesia, and Vietnam (semi-knockdown product plant). They mainly manufacture SUVs such as the Santa Fe and Tucson. Including these, other overseas plants produce internal combustion engines such as gasoline and diesel engines directly, but all hybrid engines have been produced at Korean factories (Ulsan and Asan) and shipped overseas. Kia, a group company, produces some hybrid engines at its plant in Slovakia.

The U.S. is considered the largest market for Hyundai and Kia. Last year, the number of vehicles sold locally reached 1,708,293, the highest ever recorded. This accounts for about one-quarter of the total global sales volume. Demand for hybrid vehicles has rapidly increased locally due to reasons such as fuel efficiency, leading to a surge in local sales of Hyundai and Kia hybrid vehicles. More than 220,000 hybrids were sold in the U.S. alone.

President-elect Trump, who will be inaugurated on the 20th, has pledged to abolish the electric vehicle tax credit benefits established under the Joe Biden administration. Local reports have also indicated that an executive order promoting fossil fuel industries such as oil is being prepared. During his first term, he withdrew from the Paris Climate Agreement. The industry expects that the transition to electrification in the automotive sector will be slower than initially anticipated. This is because the coexistence period with hybrids, seen as a bridge in the transition to battery electric vehicles, is expected to be extended.

Hyundai Motor Ulsan Plant Export Shipping Dock. Provided by Hyundai Motor Group

Hyundai Motor Group currently focuses on a hybrid system based on a 1.6L turbo gasoline engine. Additionally, it has developed or is developing various hybrid systems for different vehicle classes and types, including small engines under 1L, large engines ranging from 2.5 to 3.5L, and rear-wheel drive systems.

Due to the economic downturn reducing domestic new car demand, most Hyundai and Kia models can be delivered within a month after ordering, but hybrid models still take more than 3 to 4 months. The delay in delivery is largely due to unstable supply of hybrid engines. Kia has been importing engines produced in China since 2023 and assembling the final hybrid systems domestically.

Hyundai Motor Group’s new U.S. plant (HMGMA), which began trial operations at the end of last year, was initially planned as an electric vehicle-only factory but shifted to mixed production including hybrid vehicles. Hyundai is reportedly considering adding a hybrid engine plant in the U.S. as well as a new engine plant in Ulsan, its largest production base. A company official stated, "No specific decisions have been made regarding new engine plants domestically or overseas."