Hyundai granted $1.8bn in incentives to build electric cars in US state of Georgia

The facility is the largest economic development deal in the state's history

A banner welcoming Hyundai Motor Group to its future home at the Bryan County mega-site in Ellabell, Georgia. AP

The US state of Georgia and local governments are giving $1.8 billion in tax breaks and other incentives to Hyundai Motor Group in exchange for the automaker building its first American plant dedicated to electric vehicles near Savannah, according to the signed agreement disclosed on Friday.

The deal calls for Hyundai to invest $5.5bn in its Georgia plant and hire 8,100 workers. It's the largest economic development deal in the state's history and comes just months after Georgia closed another major deal with electric vehicle maker Rivian to build a factory in the state.

"Not only do these generational projects solidify our spot at the vanguard of the EV transition, but they also ensure that thousands of Georgians across the state will benefit from the jobs of the future," Pat Wilson, the state's economic development commissioner, said in a statement.

Hyundai executives and Governor Brian Kemp announced the deal in May at the project's sprawling 1,170 hectare site in Bryan County, west of Savannah. Hyundai plans to start construction on the plant next year and begin producing up to 300,000 vehicles per year in 2025. The factory will also produce vehicle batteries.

But officials declined to reveal what incentives the automaker had been promised until after the agreement was signed.

The package disclosed on Friday is worth roughly $300 million more than incentives promised to Rivian. It amounts to Georgia and four counties in the Savannah area, giving Hyundai about $228,000 per job created.

Georgia officials insist it's a worthwhile investment. Wilson said Hyundai's payroll at the new plant is expected to reach $4.7bn over 10 years. Parts suppliers are expected to create thousands of additional jobs in the state.

The $1.8bn in incentives is easily the largest subsidy package a US state has ever promised for an automotive plant, said Greg LeRoy, executive director at Good Jobs First, a group sceptical of subsidies to private companies.

“That's inherently super-risky,” Mr LeRoy said, “because you're betting a huge amount on one company and one facility.”

Local governments are giving Hyundai more than $472m in property tax breaks, although Hyundai will pay more than $357m in lieu of taxes over a 26-year period starting in 2023.

The company will also receive more than $212m in state income tax credits, at $5,250 per job over five years. If Hyundai didn’t owe that much state corporate income tax, Georgia would instead give the company personal income taxes collected from Hyundai workers.

The state and local governments spent $86m to purchase the plant site. And the state will spend $200m on road construction and improvements, plus $50m more to help fund construction, machinery and equipment. Sales tax exemptions on construction materials and machinery expenses are estimated to cost $396m.

Georgia officials say the deal requires Hyundai to pay back a portion of the incentives if the company falls below 80 per cent of promised investment or employment.

Kia, another subsidiary of the Hyundai Motor Group, got more than $450m in incentives for its plant in West Point, southwest of Atlanta. Georgia has promised SK Innovation $300m in incentives for a $2.6 billion, 2,600-worker battery plant that the Korean company is building northeast of Atlanta.

Meanwhile, Hyundai said it is unaware of any evidence of child labour being used at its Alabama parts subsidiary.

Smart Alabama, a wholly owned unit of the Korean automaker, employed immigrant workers as young as 12, Reuters reported on Friday, citing family members of three underage workers, police, and former and current employees of the factory.

Hyundai “is unaware of any evidence of the allegations", spokeswoman Dana White said.

The Smart facility supplies parts to Hyundai’s assembly plant in Montgomery, Alabama, which produces the Santa Fe and Tucson compact SUVs and Elantra sedan.

Smart denied it “knowingly employed” anyone ineligible for employment and said it relies on temporary work agencies to fill jobs and “follow the law in recruiting, hiring, and placing workers on its premises,” general manager Gary Sport said in a statement.

Hyundai “does not tolerate illegal employment practices in any Hyundai entity” and requires compliance with all local, state and federal laws, the company said in an e-mailed response to questions from Bloomberg News.