The decision of the Hyundai group to enter India and China when these markets were just opening up to foreign investment has paid off handsomely. Its success in both countries is largely responsible for the Korean carmaker’s position as Asia’s third largest light vehicle seller, behind Germany’s Volkswagen and China’s SAIC groups.
China accounts for half of Hyundai’s Asia volumes, followed by Korea with 30 per cent and India at 12 per cent. The importance of China is further illustrated in the group’s performance in Asia last year. Hyundai and subsidiary, Kia raised their combined volumes by five per cent year-on-year (YoY) to 3.3 million units, bolstered by a 16 per cent growth in China where both brands did well. This upshot offset declines in Korea (down five per cent YoY), India (three per cent YoY) and ASEAN (four per cent YoY).
Adaptive strategyHyundai and Kia’s flexibility to develop products to meet local tastes and needs has been a critical success factor in China. The group has adopted a multi-generation strategy and responded well to changing buyer preferences as, for instance, faster introduction of SUV models vis-à-vis competition. The number from Hyundai and Kia climbed from six SUV models in 2008 to 10 at present.
In particular, Hyundai’s advantage also lay in its choice of a Chinese partner in the form of the Beijing Automotive Industry Group whose resources helped Hyundai quickly expand in Beijing – the single biggest market in China for both the private car and taxi sectors. This was extremely beneficial to Hyundai in its early years in China.
A similar strategy is on display in India too. Hyundai has adapted quickly to the market’s needs especially with the development of affordably priced mini cars such as the i10 and Eon as well as sub-compact models like the recently launched Xcent. More recently, it has introduced the second generation Elite i20 and also plans to enter the fast-growing compact SUV segment.
Changing imageWe believe that Hyundai is building up its premium image in India with these measures moving away from entry-level mini cars to cement its position in the bread-and-butter sub-compact car segment.
An obvious target is Honda, which wrestled away Hyundai’s hard fought No. 2 position in the segment this year. This is where the Xcent and Elite i20 will play a pivotal role. Readers will recall that it was Hyundai which first threw down the gauntlet as a serious rival to Maruti when it first entered the Indian market two decades ago.
At that time, not many people had heard of this Korean brand till the Santro made its debut and caught the eye of customers who were looking for something new in the compact car category.
The only area of weakness for Hyundai in Asia is the southeast region, where it has a market share of barely three per cent. In fact, Hyundai and Kia may have almost written off the region, given the specific requirements of each of the major markets: pickup trucks for Thailand or MPVs for Indonesia. The view appears to be that the cost of expansion outweighs the benefits, at least for now .
Going forward, volumes in China will continue to account for half of the Hyundai group’s total in Asia. The share of its home market is estimated to fall to around 25 per cent over the long term because of the limited expansion . This should result in a better position for India, which is forecast to make up nearly 20 per cent of numbers in Asia.
Over the next seven years, the Hyundai group’s sales in Asia are projected to climb at a CAGR of three per cent. By 2021, its top five Asia markets are likely to be China, Korea, India, Australia and Vietnam.
The million dollar question is if Kia will also set up shop in India as part of this growth vision. For the moment, nobody has a clue.
The writer is Senior Market Analyst, LMC Automotive