Hyundai WIA, a key subsidiary of Hyundai Motor Group, is set to launch production of hybrid electric vehicle (HEV) engines at its Monterrey, Nuevo León, Mexico plant starting early next year. This strategic initiative aligns with the surging demand for HEVs in North America, driven by consumers’ growing preference for fuel-efficient and environmentally friendly vehicles. Additionally, Hyundai WIA’s decision considers the potential imposition of a 25% tariff on Mexican imports by the U.S., following policy announcements after President Trump’s election victory.
Expanding HEV Engine Production in Mexico
The Mexican plant is expected to manufacture approximately 200,000 units annually, primarily focusing on 1.6-liter Gamma engines used in Hyundai and Kia’s HEVs. This move is seen as a countermeasure to Hyundai WIA’s recent decline in sales, which dropped by 0.3% last year to 8.563 trillion won, primarily due to reduced production of small Kappa engines at its Seosan plant in South Korea.
Growing HEV Demand in North America
The North American market, including the U.S. and Mexico, has witnessed substantial growth in HEV sales. In the U.S., sales surged from approximately 120,000 units in 2022 to 220,000 units in 2023. Similarly, Mexico saw an increase from 100,000 units in 2020 to 150,000 units last year. Industry experts believe that even if high tariffs are imposed in the future, manufacturing in Mexico remains a strategically sound decision for Hyundai WIA.
Mexico’s Role as an Automotive Manufacturing Hub
Hyundai WIA’s choice to manufacture engines in Mexico is influenced by cost efficiency, logistical advantages, and proximity to key markets. Mexico has established itself as a major hub for the automotive industry, boasting a skilled workforce, favorable trade agreements, and a strategic location that enables seamless access to the U.S. market.
Future Prospects for Hyundai WIA
Looking ahead, Hyundai WIA plans to begin mass-producing HEV engines by 2026, though specific production volumes and vehicle models remain undecided. A Hyundai Motor Group official stated, “As the importance of the North American market grows, Hyundai WIA plans to mass-produce HEV engines by 2026, but the production volume and vehicle models have not been finalized internally.” The company has also clarified that it is not considering contract manufacturing for extended-range electric vehicle (EREV) engines.
Potential Expansion into EREV Engine Production
Industry insiders predict that Hyundai WIA may secure additional engine orders for Hyundai and Kia’s upcoming extended-range electric vehicles (EREVs) set to launch in North America. Expanding into EREV engine production could further strengthen Hyundai WIA’s market position, stabilizing its revenue and marking a significant shift in its long-term production strategy.
Hyundai WIA’s move to produce HEV engines in Mexico highlights its commitment to meeting North American market demands while optimizing costs and logistics. As the global automotive landscape evolves, this strategic decision positions Hyundai WIA for sustained growth and competitiveness in the hybrid and electric vehicle sector.