Hyundai and Kia Emerge as Tesla’s Biggest U.S. Rivals (2024)

Hyundai Motor and affiliate Kia jointly captured the No. 2 slot last year in U.S. electric-vehicle sales, trailing only Tesla, which still holds a commanding lead. Analysts say the allied carmakers, both a part of South Korea’s Hyundai Motor Group conglomerate, are poised to cement or advance their lead over non-Tesla rivals this year with fresh EV models and aggressive pricing.

Behind their growth, which last year outpaced both Tesla and the broader EV market, is an aggressive bet on the technology that was placed last decade and is now materializing in showrooms as sales for EVs have taken off in recent years.

Today, Hyundai and Kia sell a broader lineup of EVs than many rivals, including Tesla, with battery technology that allows for fast charging speeds and models ranging from a large, family-hauling SUV to cheaper, battery-powered crossovers and sedans.

The two car companies took advantage of changes to the EV tax credit rules to offer attractive lease deals that made these cars more affordable, and they benefited from the stumbles of some of their rivals. General Motors, for instance, has encountered manufacturing delays that have slowed the rollout of its new EVs.

“It’s pretty simple. They stepped up and made the investment in EVs," said Matthew Phillips, chief executive of Car Pros Automotive Group, which owns several Kia, BMW and Honda dealerships on the West Coast. “They came with the right combination of styling, features and cost."

As recently as a decade ago, Hyundai and Kia were seen as underdogs in the car industry, churning out inexpensive vehicles panned for their looks and quality issues. But that image has shifted in recent years, especially as EV sales have taken off in the U.S.

Spurred on by the launch of Tesla’s Model 3, Hyundai and Kia said in 2017 that they would roll out a lineup of designed-from-scratch electric vehicles. The move got them off to an early start, allowing them to beat many established carmakers to market with these purpose-built electric-car designs, which offer better performance and profitability.

Executives at Hyundai and Kia also viewed the EV transition as a way to reset their image with buyers and draw in more well-heeled customers who might not have otherwise considered these two brands.

While a gas-powered Kia SUV might not be comparable in price or features with a luxury vehicle like a Cadillac, the same isn’t true for its electric offerings, said Tyson Jominy, J.D. Power’s vice president of data and analytics.

“For $55,000 you can get a Kia or a Cadillac [EV]. Those two don’t usually compete against each other," he said.

While Tesla still holds a strong grip on the EV market in the U.S.—last year it accounted for about 55% of all battery-powered vehicles sold—its share has been slipping in recent years as new rivals have come forward.

Hyundai, its luxury brand Genesis, and Kia combined now sell nine electric models and account for 8% of electric-car sales in the U.S., from the $32,000 Hyundai Kona to the Kia EV9, a large, seven-seater SUV that starts at $55,000 and is favored by buyers with families.

And it has more on the way in the next few years, including another large SUV for Hyundai and more affordable models from Kia.

Tesla, by comparison, sells five different models, with the cheapest one starting at about $39,000.

The broader selection of electric vehicles has helped give Hyundai and Kia an edge, expanding their appeal beyond early adopters to more mainstream buyers. The two also sell a wide range of hybrids and plug-in hybrids that attract shoppers looking for an alternative to the traditional gas-engine vehicle.

“It’s one thing to sell a $100,000 pickup truck or high-end sport-utility vehicles. It’s another thing to sell a vehicle to a mom-and-pop consumer," said Mike Wall, an auto analyst at S&P Global Mobility. “This isn’t the field of dreams, where if you build it, they will come."

Hyundai and Kia, which build their EVs outside North America, have also grown sales, despite losing access to a $7,500 tax credit that can be used by buyers to defray the higher cost of buying an electric vehicle. Revisions to the tax credit under the Inflation Reduction Act made only vehicles built in the region eligible.

While this change initially dented demand, the companies found a workaround: The tax credit could still be used for vehicles leased to customers. Finance companies can receive a $7,500 tax credit when they purchase an EV to lease out. Hyundai and Kia passed those savings on to customers in the form of lower monthly payments, helping to boost interest in their vehicles.

“We said the IRA is not going to stop us, or be a hurdle. We need to move on," said José Muñoz, Hyundai’s chief operating officer. “We needed to capitalize on what was available to us, which was leasing."

As a result, Hyundai went from leasing around 5% of the EVs it sold to more than 40%, he said.

Hyundai and Kia will soon face stiffer competition, as the number of EV models available for sale is expected to nearly double this year to around 100, according to S&P Global Mobility. Right now, the two companies are advantaged by the breadth of their offerings, but other automakers are catching up, with plans that include offering lower-price EVs.

Concerns are also mounting within the auto industry that EV demand in the U.S. is cooling. In response, some carmakers are postponing electric-vehicle spending while they revamp their production plans.

Meanwhile, the two Korean car companies continue to accelerate their EV expansion plans in the U.S., including building a new plant and battery-making facility in Georgia and undertaking a $200 million overhaul of an existing factory to boost EV production.

Steven Center, an executive vice president at Kia, said the automaker is trying to make the most of its early momentum by accelerating its rollout of new models to build scale.

“It’s like a horse race, you have to get out in front as soon as possible," Center said.

Write to Sean McLain at [email protected]