Hyundai's announcement comes as US president Joe Biden's administration prioritised a push towards electric cars, aiming to replace the 650,000 vehicles in federal fleets with US-made electric vehicles.
In January, Biden also signed an executive order aimed at imposing tougher rules on government procurement practices to increase purchases of American-made products, strengthening domestic manufacturing and create markets for new technologies.
Analysts said Hyundai's US investment was essential to take advantage of the Biden administration's EV policies and to receive subsidies and tax incentives.
"If Hyundai seeks to fully leverage US EV policies, they need to pursue not only EV production but also sourcing major auto parts in the United States," said Kevin Yoo, an analyst at eBEST Investment & Securities.
Lee added that it is up to how the South Korean carmaker sources US-made batteries for its US EV production, raising potential further investment in the United States by top battery makers.
Hyundai's announcement came before Biden meets with South Korean president Moon Jae-in in Washington next week in talks that are expected cover North Korea, Covid-19 vaccines and other topics.
Biden has called for US$174 billion in new spending to boost electric vehicles and charging.
Hyundai will begin electric vehicle production at a US facility in 2022, while affiliate Kia Corp also plans to build electric vehicles in the United States. Hyundai has a factory in Alabama, while Kia produces cars at a plant in Georgia.
"We are reviewing options including expanding on our production facility after we’ve taken a closer look at US market conditions and US government’s new EV policy," Hyundai said in a statement.
The move comes as Hyundai's major electric battery supplier, SK Innovation, proceeds with construction of new US factories for Volkswagen and Ford and plans to expand capacity in the United States.
SK Group chairman Chey Tae-won has said SK could invest up to US$5 billion for battery business in the United States, meaning it appears there is room for SK to invest further in the US, a person familiar with the matter said on Friday.
Since 2018, SK Innovation has so far invested about 3 trillion won (US$2.6 billion) to build two EV battery factories in Georgia.
Hyundai, South Korea's No. 2 conglomerate, did not provide the investment breakdown but said the spending would be primarily for Hyundai and Kia.
Analysts said that Hyundai is likely to allocate the biggest amount to its EV capex, and that spending for cooperation with other US companies could be more flexible depending on how the US EV market changes.
Hyundai said it will work with the US government and business partners to install hydrogen refuelling stations and offer its NEXO hydrogen SUVs.
Hyundai is also investing in robotics, urban air mobility and autonomous driving technology, the company said.
