| The Hyundai Group currently boasts global
scales of up to 3.1 million, up from the 1.3 million units it sold seven
years ago. In one of its key markets, the US, South Korea’s largest
carmaker has recorded a sales figure rise for some time now and other
significant markets, namely China, India and Europe have also contributed
to this rise in status. Ultimately, Hyundai’s great ambition is
to meet its target of annual sales of 5 million units by 2010, making
it the fifth largest carmaker in the world.
This incredible rise to fame is even more astonishing given the comparative
youth of the company. Established in 1967, Hyundai is a relatively young
carmaker, which is not surprising as Korea is so new to motoring. Since,
it has grown into the empire that is the Hyundai Motor Group comprising
Hyundai Motor Company, Kia Motors, Hyundai Mobis and over two dozen automotive-related
subsidiaries and affiliates.
Employing over 50,000 people worldwide, Hyundai boasted €22 bn ($26
bn) in sales last year – on a non-consolidated basis. Hyundai and
Kia cars are sold in 193 countries through some 5,000 dealerships and
showrooms.
Hyundai’s June sales reached an all-time monthly high of 232,515
units helped by brisk overseas and domestic sales. Strong demand for the
Sonata and Grandeur/Azera saloons helped lift domestic sales of passenger
cars by as 14.1 per cent month-on-month to 29,599 units. For the third
consecutive month, the Sonata remained South Korea’s best selling
car. Sales of SUVs and minivans rose by 16.4 per cent to 8,323 units with
the Santa Fe registering a 33.1 per cent improvement. Overseas shipments
from Korean factories rose by 6 per cent month-on-month to 120,690 units
while sales by overseas manufacturing units in India, China, Turkey and
US jumped 42.4 per cent to 60,787 units as Beijing Hyundai’s plant
returned to normal operations following a scheduled shutdown for expansion
of the manufacturing lines.
First half global sales reached 1,230,929 units, up 15.7 per cent year-on-year
driven by strong exports with overseas sales growing by 22.4 per cent
to 970,144 units. However, domestic sales for the first half were down
4 per cent to 260,785 units.
Willing to take a gamble
One of the main reasons for success has been the carmaker’s willingness
to learn from its mistakes, to evolve and even change where and when necessary.
This it owes to its lack of heritage which in turn has allowed for freedom
of thought and action.
One of the key changes came about in 1998 when Hyundai put together a
scheme in the US whereby it offered a 10-year, 100,000 mile guarantee
covering most engine and transmission components. Risky as it was, it
meant that the carmaker had to raise its quality standards substantially.
The result has been rising sales not only in North American and Europe
markets, but more interestingly in emerging markets like India, China
and Russia. Although the carmaker was a relative latecomer this year alone
it has seen its status rise to number two in India as well as eyeing-up
the leading position in the small car segment there.
Hyundai may have entered the imposing Chinese market, in a partnership
with Beijing Automotive Industry Holdings, only two years ago, but Beijing
Hyundai Motor managed to speed ahead to first position in the first quarter
of this year through selling over 56,000 Elantra and Sonata saloon cars,
doubling sales of the year before.
China’s dispute with Japan earlier this year has led to an informal
alliance with Korea, which in turn has fuelled sales of Korean products
on the Chinese market.
Samsung, for instance, has become the most popular mobile phone brand
in China exceeding any Japanese brand by far.
In Russia Hyundai has also jumped into the lead position among foreign
brands. One of the reasons for its success is that it offers more for
the price. Furthermore, unlike in Europe, Hyundai is considered a high-end
brand in developing nations. It has achieved this by offering similar
products worldwide, instead of hand-me-downs, as is often the case with
other carmakers.
The importance of North America
The US is one of Hyundai’s key target markets and its steady rise
in one of the biggest car consuming nations has been the talk amongst
analysts for some time. This has mainly been attributed to a rise in product
quality that has placed the brand more or less directly against its Japanese
competitors. Interestingly enough, Hyundai has historically benchmarked
the Japanese, namely Toyota. In March alone, Hyundai recorded a 11 per
cent rise in annual sales in the US selling over 40,000 vehicles, of which
around 11,400 were its flagship Sonata.
The US is so important to the South Korean that it has invested even further
in its €925 mn ($1.1 bn) plant in Alabama. Hyundai Motor Manufacturing
Alabama (HMMA) started producing the Sonata in early 2005, and plans to
make the next generation 2007
Santa Fe SUV next spring. At full capacity, it expects to produce as
many as 300,000 vehicles annually.
Building around the world
Hyundai’s tactic, it seems, is to build large plants around the
world. Hyundai only entered India in 1998 – way behind US and Japanese
rivals – but it set up a manufacturing plant capable of building
100,000 units a year of its latest models as well as establishing a network
of services and dealerships to offload these cars to the public. “It
was a no brainer for Indian customers to figure out who offered the most
up-to-date technologies,” says Min Wang Sik, who oversees the carmaker’s
sales operations in India. Since then the facility has had to expand its
capacity to 250,000 units. This in itself must be a remarkable victory
in a market so alien to many other manufacturers.
Earlier this year Hyundai announced that it will build a second assembly
plant in India. “Hyundai Motor India Ltd (HMIL) will serve as one
of our key global manufacturing centres. India along with Brazil, Russia
and China show the greatest growth potential and these are the markets
of the future,” announced Hyundai chairman Mong-Koo Chung.
HMIL’s 150,000 unit per annum second plant has begun construction
on a site adjacent to the existing facility at the south eastern port
city of Chennai. When completed by 2007, HMIL’s annual manufacturing
capacity at Chennai is expected to be increased to 400,000. In addition
to serving the Indian market, output from this plant will be shipped to
Europe, Latin America and neighbouring markets, including the Middle East
region. It will build the successor to Santro, HMIL’s highly successful
mini car. Furthermore, the Indian partnership is targeting an Indian market
share of 20 per cent or more in 2007.
With the quick rise in India’s middle class, with it a substantial
growth in disposable income, the country has become one of the fastest
growing car markets in the world. In 2003, Indian car sales reached 650,000
units and 800,000 units last year. This year, sales of 920,000 units are
forecast. Based on recent growth trends continue, India’s car market
will grow to 1.15 million units by 2007, 1.45 million by 2009 and 1.62
million by 2010.
For Hyundai, this just means getting just that little bit closer to fifth
position in global terms.
Only in July, Hyundai signed a Memorandum of Understanding with China’s
Guangzhou Motor Group to establish a 50-50 joint venture company for the
manufacturing, sales and service of commercial vehicles. With a total
investment of €356 mn ($430 mn), the two partners will establish
Guangzhou Hyundai Motor that will build a new plant in Huadu, Guangdong
province for the manufacturing of a light, medium and heavy duty trucks
and buses.
Construction work on the new plant will begin by the end of this year
and is due for completion by 2007. The initial production capacity is
only 20,000 units per year but it will be expanded to 200,000 by 2011
with a total investment of €1 bn ($1.24 bn).
“This commercial vehicle joint venture is critical to reach our
goal of producing one million cars in China by 2008 and making Hyundai
the best selling nameplate in China,” says Chung. China’s
bus market is seven times larger than Korea’s but the biggest area
of opportunity for Hyundai is in China’s light and medium-duty truck
market which is 100 times larger than Korea’s.
All this is good, but many industry analysts fear that more lessons need
to be learnt before the South Korean carmaker reaches its ultimate ambition.
These facilities cost huge amounts of money, at the same time some fear
overcapacity and a flood of unwanted products onto the market.
Perhaps Hyundai needs to live and learn from its mistakes and from the
sound of it, it is willing to do so and benefit from the wisdom achieved.
“ Korea has been very quick to catch up with the rest of the world,”
says Richard Chung, executive director for Asia Pacific industrial design
at interior supplier, Johnson Controls.
“Hyundai’s primary focus now is on quality and its benchmark
is Toyota. If I was Toyota, the one company I would be most concerned
with would not be General Motors or Ford, but Hyundai,” adds the
designer who is an ex-pat second generation Korean from the US now based
in Seoul. “It is about the only company that can challenge |
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