Hyundai Motor: Launching the Genesis luxury brand and Ioniq green car series

Struggles in China and the U.S. market, 2016 global shipments decline by 140,000 units

2017/05/23

Summary

The flagship Genesis G90
The flagship Genesis G90 was released in 2016.It is equipped with V8 5000cc or V6 3300cc engines mated with an 8-speed AT and aims to compete with top-level luxury vehicles such as the Mercedes-Benz S Class and BMW 7 Series (Photo: Hyundai Motor Company).

<New product strategy>

  This report will examine the new product strategy of Hyundai Motor Company and its sales trends. While the OEM's performance has been at a standstill in recent years, it plans to focus on enhancing its product and brand value to achieve stable sales as well as revenue and profit growth. Specifically, over the period 2016 - 2017 it launched the Genesis luxury brand, released the Hyundai Ioniq and Kia Niro green car series, and is planning the release the high-performance N series.

  In existing products field, it plans to strengthen its crossover vehicle lineup, which has not kept up with other automakers.

<Sluggish performance>

  Hyundai Motor's global sales grew a significant 66% in 4 years, from 4 million units in 2007 to 6.6 million in 2011. However, the OEM was concerned about risks associated with rapid expansion and stopped expanding its production capacity for a time to focus on structural improvements in areas such as quality.

  As a result, although it has risen significantly in the customer satisfaction rankings, group shipment volume in 2015 only increased by 10,000 units. In 2016, it decreased by 140,000 units to 7.88 million vehicles due to a work stoppage at its plants in Korea.

  The automaker's operating profit margin has declined from 10% in 2010 to 8.5% in 2014 and 5.5% in 2016. Kia Motor's operating profit margin during the same period fell from 7.5% to 5.5%, and 4.7%. Market watchers have suggested the main reason for this decline is the automaker's struggles in China and the U.S., its largest and second largest markets, as well as the expanding discounts to maintain sales volume in those markets.

  In China, Beijing Hyundai's fourth and fifth plant started operating in the period 2016 - 2017. The Group's production capacity will reach 2.7 million units in 2018. The automaker plans to ship 1.95 million units in 2017. Therefore, there is concern that the plant operation rate will decline.

  In addition, anti-Korean sentiments have risen as a result of the deployment of the Terminal High Altitude Area Defense system (THAAD), and the Group's sales in March 2017 decreased by 52.2%. If this state of affairs continues it could significantly impact the automaker's sales and profits.

Related reports:

Hyundai: Global sales fall 100,000 units for 2015 1H (October 2015)
Hyundai-Kia Group: Declining profitability since 2013 (September 2014)