Hyundai Motor Group: advancing electrification with the Kona Electric SUV

Expanding lineup for SUVs, the Genesis luxury brand and high-performance N series

2018/12/20

Summary

Kona Electric
Hyundai Kona Electric - fully-electric subcompact SUV

After Hyundai Motor Group’s global sales fell by 8.1% year-over-year (y/y) to 7.24 million units in 2017 partly because sales in China plummeted due to worsened diplomatic relations between China and Korea, the Group’s sales for the period January-September 2018 decreased by 0.6% y/y to 5.26 million units. Although its sales are picking up, a full-fledged recovery has not been instituted as growth in major markets such as the US and China is slowing and trade friction between the two countries is exerting a significant impact.

Hyundai Motor Company (HMC)’s operating profit margin has been declining gradually from 9.5% in 2013 to 2.7% for the first nine months of 2018, while Kia Motors’ operating profit margin has also been falling from 6.7% to 1.9% during the same period. Hyundai Group said that the low profitability in the recent period was caused by an increase in provisions related to recalls and a stronger Korean won against the US dollar. However, the causes of its lingering business slump are presumed to be a lack of a lineup for SUVs that enjoy growing demand and weakening competitiveness of the Group’s models.

Hyundai Group plans to strengthen its model lineup for SUVs, the “Genesis” luxury brand and high-performance “N” series, and aims to improve the brand value and competitiveness of its products. Meanwhile, the Group will expand strategic partnerships with global leaders in the field of next-generation technologies including the CASE. The Group has formed partnerships with Baidu, Aurora and Metawave for autonomous driving technologies while it has invested in Grab and Migo which offer mobility services.

In its electrification strategy, Hyundai Group plans to increase the number of its electrified models (HV, PHV, EV and FCV) from 14 in 2018 to 31 in 2020 and 38 in 2025. The Group also aims to maintain a leading position in the performance of the EV and FCV and to rank second in sales of electrified vehicles after Toyota.

In the US, Hyundai Group saw increased sales of light trucks as the strategy to shift its passenger-centered lineup to more SUVs has been finally effective. The Group will intend to increase its sales by expanding the lineup for SUVs further and introducing the Genesis luxury models as well as electrified vehicles.

In China, HMC and Kia’s sales increased in the period January-September 2018 as the impact of the deployment of the Terminal High Altitude Area Defense system (THAAD) on the diplomatic relations between China and Korea has ended, but their sales have not returned to the levels of 2016. In 2018, HMC’s annual production capacity in China increased by 150,000. While Hyundai Group’s production capacity significantly surpasses its projected shipment volume, lower plant utilization may be a matter of concern.

In India, HMC, which has the second largest market share behind Suzuki, plans to raise the annual production capacity at its Chennai plant by 50,000 units in 2019 and introduce nine new models including the electrified vehicles by 2020. At the same time, Kia Motors intends to enter the Indian market in 2019 and is building a new plant in the country with an annual production capacity of 300,000 vehicles.

 

Related reports:
Korea: Hyundai and Kia to accelerate launching SUVs and electrified vehicles (May 2018)
OEM Electrification Strategies: Strengthening HVs and diversifying into EVs, PHVs, and FCVs (May 2018)