GM Partners with Hyundai to Boost EV Development Amid Growing Competition from China

General Motors has formed a strategic partnership with Hyundai Motors to enhance electric vehicle development and battery material procurement. This alliance marks GM's shift from its previous collaboration with Honda, as both automakers face growing competition from China and shifting global market demands.

GM and Hyundai Forge Alliance to Tackle Rising Competition from China and Declining Global Demand

General Motors relies on Hyundai Motors as a new partner in developing next-generation vehicles following the termination of its electric-vehicle development partnership with Honda Motor. According to Nikkei Asia, this decision was made in response to the increased competition from China and the decline in demand in the United States and Europe, which has compelled automakers to reevaluate their strategies.

On Sept. 12, the two organizations disclosed a memorandum of understanding covering the procurement of battery materials, hydrogen technology, and the development of electric vehicles and software for commercial and passenger cars.

This would be GM's initial comprehensive alliance with a fellow automaker, even though it has collaborated with other companies in specific sectors since its 2009 bankruptcy filing. It would also achieve the first significant collaboration between U.S. and South Korean car companies.

A more intimate relationship between two of the world's largest manufacturers could significantly impact the industry. According to MarkLines and other sources, GM and Hyundai, including its affiliate Kia, sold over 13 million vehicles globally in 2023, surpassing Toyota, the global market leader.

The manufacturers intend to establish an electric vehicle supply chain that spans the United States and South Korea due to the partnership, which is being implemented in response to China's increasing competition.

Collaborative development is expected to reduce costs. CEO Mary Barra indirectly stated in a GM statement regarding the partnership that the objective is to "make vehicle development more efficient by driving greater scale and supporting disciplined capital allocation."

GM-Hyundai Partnership Aims to Overcome Battery Supply Challenges and Lower EV Production Costs

Batteries are a significant factor to consider. The United States has encountered significant challenges in overcoming its dependence on China, which controls over half of the global supply and dominates the supply chain for materials. Tesla and GM have encountered significant challenges in creating more affordable electric vehicles (EVs) due to the high cost of battery procurement, which constitutes a substantial portion of the vehicle's price.

LG Energy Solution, SK On, and Samsung SDI are among the significant battery suppliers in South Korea. U.S. automakers must depend on these corporations to develop and supply their batteries. GM has collaborated with LG Energy and Samsung SDI to invest in battery initiatives in North America.

According to David Whiston, an automotive analyst at Morningstar, the GM-Hyundai partnership will enable both parties to create affordable new models by facilitating the procurement of materials and the production of new models. Hyundai and GM have forged more robust relationships, culminating in Hyundai's acquisition of a GM facility in India in 2023.

The collaboration occurs in a significant shift in Honda's relationship with General Motors.

GM and Honda End EV Collaboration as Hyundai Partnership Marks Shift Amid Rising Competition

In 2013, the U.S. and Japanese manufacturers initiated a collaboration to develop fuel cell vehicles. In 2020, they resolved to focus on creating a mass-market electric vehicle (EV), with the initial objective of reducing the price to under $30,000.

GM and Honda had intended to capitalize on the transition to electric vehicles (EVs) at the outset; however, they encountered challenges in addressing their varying regional strategies and battery supplies and the emergence of cost-competitive Chinese players that altered the competitive landscape for affordable EVs. Honda has since established a new partnership with Nissan Motor following their decision to cease development in 2023.

The absence of hybrid vehicles, a highly sought-after segment in the North American market, impedes GM's progress. Hyundai and Kia, on the other hand, account for approximately 10% of hybrid sales in the region. Hyundai reports that high-added-value models, such as sport utility vehicles, perform well even though the demand for electric cars in the United States is declining.

The partnership also occurs in the context of a decline for both companies in China. However, the market had been a significant source of profit for GM; its joint venture experienced losses for two consecutive quarters due to competition from companies such as BYD.

Hyundai's sales in China declined 40% from the previous quarter. South Korean automakers are currently concentrating on North America and have expanded their electric vehicle capacity by constructing a new facility in Georgia.

A broader surge of realignment is sweeping across regional and segment borders in the global auto industry. Honda, Nissan, and Mitsubishi Motors are collaborating to create the next generation of vehicles. At the same time, Japanese manufacturers, such as Toyota, strive to establish a comprehensive electric vehicle supply chain in the country.

This month, BMW and Toyota announced a partnership in fuel cell vehicles. The Volkswagen Group collaborates with Rivian Automotive, an American company, to develop electric cars.