Hyundai Motor Group is moving ahead with a project to use hydrogen produced in the Saemangeum area of North Jeolla Province for power generation, in partnership with a state-run power utility. The move is seen as a strategic step to broaden its hydrogen business — until now centered on fuel-cell vehicles and fuel cells — into power generation, thickening its value chain.
Hyundai-KOEN MOU This Month
According to industry sources, Hyundai Motor (005380) plans to sign a memorandum of understanding with Korea South-East Power (KOEN) within this month, centered on hydrogen power generation. Using the agreement as a springboard, the two companies will design detailed joint business models. Hyundai is also reportedly exploring cooperation with several private power companies beyond KOEN to further expand the scope of its hydrogen business.
Behind Hyundai's tie-up with major power companies lies an intent to complete a hydrogen-based manufacturing ecosystem — one that uses self-produced hydrogen as an energy source — at an early date. Hyundai aims to build hydrogen production facilities in Saemangeum and supply power to robot production plants and AI data centers from them, realizing a "local production, local consumption" hydrogen city. KOEN, which has steadily built up its hydrogen power capabilities through cooperation with major hydrogen producers such as GS Caltex, has been tapped as the key partner to realize this vision.
Diversifying Demand to Strengthen Value Chain, Targeting Economies of Scale
Expanding demand into the power sector is expected to further solidify the overall hydrogen value chain. Hyundai entered the hydrogen passenger and commercial vehicle market early on with its Nexo fuel-cell EV and has steadily expanded fuel-cell production bases at home and abroad. The more diverse the customer base, the easier it becomes to scale up production, enhance cost competitiveness and realize economies of scale.
Hyundai Motor Group Executive Chair Euisun Chung, in a recent interview with a foreign media outlet, said, "Hydrogen is a core pillar of Hyundai's long-term vision for a sustainable future," signaling a strong commitment to expanding the hydrogen business. Having entered the hydrogen business in earnest with the 2018 launch of the Nexo, Hyundai is now drawing up a blueprint to broaden its reach across the entire value chain encompassing hydrogen production, storage and transportation. Referring to its hydrogen business brand "HTWO," Chung stressed that "building a complete hydrogen ecosystem" is the brand's goal.
The industry is paying close attention to the MOU because Chung's vision is beginning to take concrete shape.
Gigawatt-Scale Solar Complex in Saemangeum, Surplus Power Stored as Hydrogen
Industry insiders expect the partnership to take the form of Hyundai directly running generators on its own hydrogen. Hyundai plans to invest 1.3 trillion won to build a gigawatt-scale solar power complex in the Saemangeum area to produce electricity directly. The locally produced electricity will be used immediately, while surplus power will electrolyze water to store hydrogen, which can then be used for power generation when needed — maximizing energy efficiency. "Solar generation has high output variability depending on the weather, so complementary technology must be deployed alongside it," an industry official said. "Hydrogen can be an alternative — storing surplus power when generation is high and using the stored energy when generation drops."
With KOEN, which has accumulated expertise in hydrogen power generation, joining as a partner, Hyundai's hydrogen power plans are expected to gain further momentum.
Local-Production AI Hydrogen City: Energy Independence Is Key
As hydrogen-based power use becomes more sophisticated, the Saemangeum local-production AI hydrogen city project is also expected to pick up speed. The core of the project is to consume locally produced hydrogen within the region, raising the level of energy self-sufficiency. Amid prolonged uncertainty in energy supply due to instability in the Middle East, securing more robust internal energy sources also enhances production stability within the complex. With power-hungry facilities such as AI data centers and robot clusters set to be installed at scale in Saemangeum, stable energy supply is a prerequisite for the project. Chung has said, "Energy demand is rising sharply worldwide for data centers, AI infrastructure and electrified transportation, making energy security an increasingly critical issue that all of us must face," adding, "Hyundai sees great potential in hydrogen as a solution to the world's energy challenges."
Nexo Accounts for Just 0.3% of Output — FCEV Market Growth a Challenge
Adding power generation to its portfolio is also expected to diversify hydrogen demand and, in turn, enhance the stability of the overall hydrogen business. Hyundai has led its hydrogen business with fuel-cell EVs, but results have yet to meet expectations. About 5,700 Nexos were produced domestically last year — just 0.3% of total Korean output of roughly 1.8468 million vehicles. For the FCEV market to grow, the broader hydrogen utilization ecosystem, including refueling infrastructure, must expand first, but sluggish infrastructure development has kept growth slow.
For Hyundai, expanding hydrogen use beyond automobiles is an imperative it cannot afford to miss in order to keep its overall hydrogen business on solid footing. As hydrogen demand grows across diverse industries, securing profitability through economies of scale becomes easier.
Hydrogen Fuel Cell Plant in Ulsan, Localization of Electrolyzers
To that end, Hyundai is also accelerating its fuel-cell business. It is investing 930 billion won to complete a hydrogen fuel-cell production facility inside its Ulsan plant by next year, where it plans to mass-produce polymer electrolyte membrane (PEM) electrolyzers. Electrolyzers are devices that extract high-purity clean hydrogen from water by applying fuel-cell technology; Hyundai is looking to raise the localization rate above 90% and eventually pursue exports.
The group also plans to integrate hydrogen into the business portfolios of its major affiliates to maximize synergies. "The more companies use hydrogen, the more production grows, and that in turn leads to expanded consumption — creating a virtuous cycle," a business community official said.
Expectations are also growing that Hyundai's mid- to long-term growth strategy as a whole will gain momentum once the hydrogen business takes off. Hyundai has identified hydrogen, robotics and AI as its three core pillars of future growth.
