Ulsan’s EV Crisis vs. Georgia’s Acceleration: How US Policy is Forcing Hyundai’s Global Production Exodus

The ‘Dual City Saga’: Ulsan Stalls as Atlanta Accelerates

As an analyst observing the global automotive supply chain from China, I can tell you that the true measure of a policy’s impact is not in its rhetoric, but in the physical redirection of factory output. The contrast playing out within the Hyundai Motor Group (HMG) supply chain—the ‘Dual City Saga’ of Ulsan, South Korea, versus Georgia, USA—is the most potent illustration yet of how rapidly US policy is reshaping the EV world.

The headline is stark: Hyundai’s flagship electric vehicle (EV) production line in Ulsan, which manufactures the critically acclaimed IONIQ 5, is set to undergo its 10th temporary production suspension this year due to slack demand. Meanwhile, its new manufacturing base in Georgia is accelerating production, driven by direct geopolitical incentives.

This is not merely a production adjustment; it is a forced geographical and strategic recalibration. The question for Western OEMs and policymakers is clear: Is your EV strategy robust enough to withstand the financial gravity of a US-led, policy-driven supply chain shift?

The South Korean Stall: Anatomy of a Policy Shock

The repeated production pauses at Ulsan Plant No. 1’s Line 2 are symptomatic of an EV market that has hit the ‘subsidy cliff.’ The forces driving this retreat are primarily domestic policy reversal and a crumbling export environment:

• The Subsidy Cliff: The primary trigger for the domestic slump is the depletion of EV purchase subsidies in South Korea. With the application period for government rebates closing in major regions, including Seoul, the domestic EV market has cooled dramatically. Domestic sales volumes of EVs dropped from 28,528 units in September to 28,000 in October, with further steep declines anticipated.
• The Export Collapse: The line’s core challenge is a severe drop in overseas orders, confirming the global ‘EV slowdown’ narrative outside of the China market. Exports of the flagship IONIQ 5 plummeted by 65% year-on-year in the first four months of the year, while the Kona Electric saw a 42% drop.
• Mitigation Failure: Even aggressive incentive campaigns—including zero-interest financing and discounts of up to 6 million won (approx. $4,300 USD) on the IONIQ 5—have failed to reverse the sales trend.

For the typical consumer, the end of subsidies fundamentally alters the cost-benefit equation. The EV loses its ‘cheap and green’ positioning, forcing buyers to focus on more inconvenient truths: inadequate charging infrastructure and uncertainty around residual value and battery life.

The IRA’s Unintended Consequence: Why Georgia is Accelerating

The contrast to the Ulsan crisis is Hyundai Motor Group Metaplant America (HMGMA) in Georgia. While Ulsan slows to a crawl, the Georgia facility—Hyundai’s first dedicated EV plant in the US—is actively ramping up production of the IONIQ 5 and the forthcoming IONIQ 9.

• Avoiding Geopolitical Tariffs: A primary driver is the threat of escalating trade barriers, including the announced 25% tariff on imported cars and light trucks. Manufacturing the vehicles locally is the only guaranteed way to bypass this potential cost burden.
• Securing IRA Incentives: Local production is the prerequisite for HMG to secure the lucrative consumer tax credits and manufacturing incentives offered by the US Inflation Reduction Act (IRA). For a company that sold 48,000 IONIQ 5s in the US last year, this represents a massive, unavoidable financial incentive to localize.
• The Policy Lever: The US has successfully weaponized its industrial policy. By structuring incentives around local-content requirements (LCRs), the IRA has effectively compelled one of Asia’s most powerful auto exporters to shift a core part of its manufacturing base across the globe. This shift, in turn, actively reduces export volume from South Korea, compounding Ulsan’s crisis.

Analyst View: The Geopolitical Supply Chain Shift

The Ulsan-Georgia dynamic is a powerful case study in the new geopolitical economy of manufacturing. The US Inflation Reduction Act is not a climate bill; it is a supply chain re-engineering tool.

For European and US OEMs, the takeaway is critical: the decades-long optimization model of centralized global production is officially dead. Governments in Beijing, Washington, and Brussels are now explicitly prioritizing national security and local job creation over free-market efficiency. HMG’s choice—to accelerate US investment despite overcapacity at home—shows that when incentives are large enough, geopolitical policy supersedes purely economic logic.

Expect more such ‘Dual City’ stories as other global automakers, including European and Japanese giants, are forced to make similar, painful choices to localize production or accept a major cost disadvantage in the world’s most profitable auto market.

Recommended Reading

To gain a deeper understanding of the forces at play in this strategic relocation, I recommend:

• Global Shifts in the Automotive Sector: Markets, Firms and Technologies in the Age of Geopolitical Disruption by Martin Krzywdzinski et al. This text offers a necessary, multi-region examination of how trade wars, policy shifts, and the transition to EVs are reshaping international divisions of labor in the auto industry.