Automobile parts company Hyundai Mobis signed an investment agreement with the Slovak government on Wednesday to build a new manufacturing facility for electric vehicle (EV) parts. The agreement, worth approximately $257 million (350 billion won), includes the construction of a Power Electric (PE) system plant in Novaky and an expansion of its existing Zilina facility to produce EV braking systems. 

This new plant, covering about 26 acres (105,700 square meters), is expected to be completed by the second half of 2025 and will have the capacity to produce 300,000 PE systems annually. The deal strengthens Hyundai Mobis’ foothold in the European EV market as the new facility will allow Hyundai Mobis to enhance its role in supplying major European automakers.

WHY IT MATTERS

Hyundai Mobis’ investment in Slovakia faces heightened risk due to declining demand for EVs in Europe. Last month’s data from the European Automobile Manufacturers’ Association indicates a downward trend in EV sales. Hyundai Mobis’ strategy of increasing its reliance on the European market may backfire if current trends continue.

Additionally, currency fluctuations between the South Korean won and the euro present a growing financial risk. The euro has fallen to a two-month low, driven by expectations of faster interest rate cuts by the European Central Bank amid weaker economic data from the Eurozone. Investors are anticipating further cuts, which could weaken the euro even more. This decline, coupled with stronger U.S. economic performance, threatens to erode Hyundai Mobis’ profit margins when converting euro-denominated revenue into won.

Despite the immediate risks, Hyundai Mobis may be making this investment decision with the long-term view in mind. European consumers continue to prioritize environmental concerns, and governments are committed to achieving carbon neutrality goals. These factors could sustain demand for electric vehicles and zero-emission technologies in the long term.