Hyundai Group plans to sell 7 million vehicles in 2012, up by 400K over 2011
Focusing on quality improvement
2012/04/27
- Summary
- Hyundai Group's sales to increase from 6.6 million vehicles in 2011 to 7 million in 2012
- The Group's overseas production capacity at the end of 2012 is 3,640,000 vehicles
- Beefing up production capacity in Korea, leveraging the weak Won and FTA to expand exports
- Introducing new models in succession to refresh product portfolio in 3 to 4 years
- Hyundai's brand value: Structural improvements in the US market
- Hyundai Group's business results: Faster growth of sales revenues than sales volume, profits than revenues
Summary
Hyundai Motor Group has achieved rapid quantitative expansion coupled with qualitative improvement in recent years. In 2011, the group sold 6.6 million vehicles (up 14.9% from the previous year) and kept the fifth place among automakers in global sales that the group earned in 2010. Hyundai Motor registered a 16.1% increase in revenues (excluding those of Kia's) to 77,798 billion Won (approx. US$ 68.244 billion) and 35.1% increase in net income to 8,105 billion Won (approx. US$ 7.11 billion).
Hyundai earned the North American Car of the Year award with the Genesis in 2009 and the Elantra in 2012 raising Hyundai to the same level as the Japanese, American and European automakers in terms of quality competition.
In 2009, Hyundai began platform integration efforts to reduce costs and the lead time of product development. As a result, the vehicles based on the six integrated platforms accounted for 62.1% of Hyundai's global production in 2011.
Hyundai's US plant began to operate in 2005, followed by the construction of Kia's US plant and Hyundai's assembly plants in China and Europe, and the group's combined capacity rose to 6,540,000 vehicles at the end of 2011. As Hyundai's third plant in China and its plant in Brazil are scheduled to start operating in the second half of 2012, the total capacity will rise to 7,150,000 vehicles by the end of 2012.
The group's goal for global sales in 2012 is set at 7 million vehicles, a rather conservative figure considering its rapid growth in the past two years. However, Hyundai Motor's global utilization rate was 107.4% in 2011 and the limited production capacity is preventing the Hyundai Group from drastic sales expansion in 2012. Hyundai is seeking a qualitative improvement in 2012, rather than excessive volume expansion, considering the need to maintain quality and the suppliers' production capacities.
As a way to increase production capacity, Hyundai will expand production at its plants overseas and at home as well. Hyundai Motor Group will build a new line with an annual capacity of 160,000 vehicles at Kia Motors' Gwangju plant. By doing so, the group plans to increase exports of a broader range of models including luxury models leveraging the weak Won and FTA that Korea concluded with EU and the US.
Related Reports:
Detroit Auto Show 2012 (3): Korean and European OEMs (Mar. 2012)
Korea: Hyundai/Kia expands overseas production capacity to 4.14 million in 2012 (Sep. 2011)
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Hyundai Group's sales to increase from 6.6 million vehicles in 2011 to 7 million in 2012
Hyundai Motor Group sold 6.6 million vehicles in the world in 2011.
Its sales volume increased by 2,620,000 units in four years from 3,977,000 units in 2007. The Group experienced a significant increase especially in the past two years by 1,957,000 units, including 1,102,000 units in 2010 and 855,000 in 2011. To meet the rising demand, the group increased its production volume by 1,246,000 units at overseas plants and 711,000 units at plants in Korea.
Hyundai Motor's global plant utilization (other than that of Kia Motors) rose from 89.9% in 2008 to 107.4% in 2011 while its global inventory declined from about 3 months of supply in January 2010 to less than 2 months in January 2012. The high plant utilization and low inventory levels will allow Hyundai Motor to proceed with its Value Pricing Strategy (aimed at maintaining appropriate prices).
Hyundai Motor Group announced that its global vehicle sales plan for 2012 is set at 7 million units, up 400,000 units from the actual quantity in 2011, nearing the limit of its present production capacity. In consideration of the sluggish growth predicted of the global automotive market in 2012, and to respond flexibly to the unclear environments surrounding the EU market, the group will focus on enhancing basic performances and environmentally-responsible technologies toward qualitative enhancement rather than excessive quantitative expansion.
Ex-factory sales |
| (1,000 vehicles) |
| 2007 | 2008 | 2009 | 2010 | 2011 | Plan for 2012 | ||
|---|---|---|---|---|---|---|---|
| Hyundai Motor | Korea Plant (thereof:) Korea (thereof:) Export Overseas Plant | 1,700 624 1,076 917 | 1,669 570 1,099 1,128 | 1,612 701 911 1,494 | 1,731 658 1,073 1,881 | 1,884 682 1,202 2,175 | 1,945 684 1,261 2,345 |
| Total | 2,617 | 2,797 | 3,106 | 3,612 | 4,059 | 4,290 | |
| Global Utilization | 94.4% | 89.9% | 91.5% | 100.6% | 107.4% | 103.2% | |
| Kia Motors | Korea Plant (thereof:) Korea (thereof:) Export Overseas Plant | 1,114 272 843 246 | 1,056 315 741 343 | 1,142 411 731 392 | 1,400 483 917 730 | 1,581 492 1,089 957 | |
| Total | 1,360 | 1,399 | 1,534 | 2,130 | 2,538 | 2,710 | |
| Hyundai Group | Korea Plant (thereof:) Korea (thereof:) Export Overseas Plant | 2,814 896 1,919 1,163 | 2,725 885 1,840 1,471 | 2,754 1,112 1,642 1,886 | 3,131 1,141 1,990 2,611 | 3,465 1,174 2,291 3,132 | |
| Total | 3,977 | 4,196 | 4,640 | 5,742 | 6,597 | 7,000 |
Source: ：Two companies' 2011 Financial Results, Hyundai Motor Investor Presentation February 2012 (Note) Kia Motors' ex-factory sales plan of "2,710 thousand vehicles" for 2012 is a calculated value equal to 7 million vehicles (Group's total sales plan) less 4,290 thousand units (Hyundai's plan). The planned global retail volume announced by Kia for 2012 is 2,712 thousand vehicles.
The Group's overseas production capacity at the end of 2012 is 3,640,000 vehicles
Hyundai Motor Group has plants in the US, China, India and Europe other than Korea. As Hyundai's third plant in China and a new plant in Brazil will start operations in the second half of 2012, the group's overseas production capacity at the end of 2012 will stand at 3,640,000 vehicles (2,550,000 by Hyundai, 1,090,000 by Kia).
As for 2013 and afterwards, Hyundai Motor will produce 160,000 units of commercial vehicles a year in China starting in 2013 with a local partner. Kia Motors has announced plans to start operating a third plant in China in the second half of 2014 with an annual capacity of 300,000 vehicles.
Capacity Expansion Plan by Region |
| (1,000 vehicles) |
| Actual | Plan | |||||
|---|---|---|---|---|---|---|
| 2010 | 2011 | 2012 | 2013 | 2014 | ||
| Hyundai Motor | Korea | 1,820 | 1,820 | 1,870 | ||
| Total Overseas | 1,800 | 2,050 | 2,550 | |||
| US China (Note 1) India Turkey Czech Russia Brazil | 300 600 600 100 200 | 300 600 600 100 300 150 | 300 900 600 100 300 200 150 | plus 160 | ||
| Worldwide | 3,620 | 3,870 | 4,420 | |||
| 2010 | 2011 | 2012 | 2013 | 2014 | ||
| Kia Motors (Note 2-1) | Korea | 1,620 | 1,640 | 1,640 | plus 160 | |
| Total Overseas | 830 | 1,030 | 1,090 | |||
| US (Note 2-2) China (Note 2-3) Slovakia | 200 330 300 | 300 430 300 | 360 430 300 | plus 300 | ||
| Worldwide | 2,450 | 2,670 | 2,730 | |||
| Hyundai Motor Group Total | 6,070 | 6,540 | 7,150 | |||
| Source: ：Hyundai Motor Investor Presentation February 2012 | |
| (Notes) 1-1. | In November 2010, Hyundai Motor announced a plan to build a third plant in China with an annual capacity of 400,000 vehicles which would raise its capacity in China to 1,000,000 vehicles. In the announcement made in February 2012, Hyundai's total capacity in China in 2012 is said to be 900,000 vehicles. |
| 1-2. | In April 2011, Hyundai Motor concluded an agreement with a Chinese manufacturer of commercial vehicles, Sichuan Nanjun Automobile Group, to establish a joint venture company, Sichuan Hyundai Motor. The two companies will upgrade existing facilities toward producing 160,000 units of commercial vehicles (150,000 trucks and 10,000 buses) starting in 2013. |
| 2-1. | Hyundai Motor's home and overseas production capacities are as announced by Hyundai. Kia Motors' production capacities are based on figures found in Kia Motors 2011 Business Results, Korean Investment & Securities, etc. |
| 2-2. | Kia Motors has been producing Kia Sorento, Kia Optima and Hyundai Santa Fe at its plant in Georgia, US. The company expanded the painting and other key facilities and increased the capacity from 300,000 vehicles to 360,000 at the beginning of 2012. The increased capacity is used to build more of the well-selling Optima. |
| 2-3. | In November 2011, Kia Motors and Chinese partners, Dongfeng Motor and Yueda Group, agreed to build a third plant that belongs to Dongfeng Yueda Kia Motors. The new plant will start operating in the second half of 2014 with an annual capacity of 300,000 vehicles which will boost Kia's capacity in China to 730,000 vehicles. |
Beefing up production capacity in Korea, leveraging the weak Won and FTA to expand exports
Hyundai Motor Group, aside from the enhancement of its overseas plants, is following a policy to expand exports by taking advantage of the weak Won and FTA arrangements. The group has already increased exports from Korea from 1,642,000 vehicles in 2009 to 2,291,000 in 2011. Kia Motors plans to add a new assembly line in its Gwangju plant with annual capacity of 160,000 vehicles. The group reportedly will increase overall efficiency by limiting the number of production models at its overseas plants while producing a broad range of vehicles including luxury models in Korea for export.
The domestic sale in Korea (total demand) has been registering year-on-year decline since October 2011 in contrast to the increasing sale of imported vehicles. Hyundai Motor Group has been expanding its business by diverting profits arising from the sale in Korea to invest in its overseas operations. The group reportedly will suffer significantly if the home market remains sluggish.
Beefing up production capacity at Kia Motors' Gwangju plant
| Hyundai Motor Group plans to invest approximately 11 billion yen in Kia Motors' Gwangju plant to build a new line with an annual capacity of 160,000 vehicles. The new line is scheduled to start operating in 2013. The Gwangju plant will have a total annual capacity of 620,000 vehicles (Kia Motors' production capacity in Korea will increase to 1.8 million vehicles). The plant will produce the small cars, Kia Soul, and the Sportage CUV for export mainly to the United States. |
FTA between Korea and EU and the US coming into force
| With EU | The FTA between Korea and EU came into force in July 2011 after which the 10% duties on passenger car export from Korea to EU will be lowered in phases. The duties on 1500cc or larger midsize and large-size cars will be removed in July 2014 and the duties on small cars less than 1500cc will be removed in July 2016. |
|---|---|
| The 8% duties on exports from EU to Korea will be lowered and finally removed entirely in the same schedules as those written above. European cars are already leading the imported car market in Korea for the past few years. The midsize and small cars under 2000cc accounted for more than 30% of all imported cars in 2009 and the percentage is increasing steadily since then. | |
| Hyundai Motor changed the production site of its "i40" strategic model for EU (VW Passat class car) from the originally planned India to Korea. Export of the "i40" to EU started in the fall of 2011. Kia Motors' plant in Slovakia follows the policy to procure 30 to 40% of all material supply from Korea. | |
| With US | The FTA between Korea and the United States came into force on March 15, 2012.The 2.5% import duties imposed on passenger cars by the US will be abolished in 2016. The 8% duties imposed by Korea were lowered to 4% concurrently with the coming into force of the agreement and will be removed entirely after five years. |
| The American, Japanese and European automakers have already lowered the tag prices of the cars imported from the US for sales in the Korean market. To meet the price competition, Hyundai Motor lowered the prices of the upper-end models of its luxury cars, Grandeur (Azera in the US) and Genesis. |
| Source: Nihon Keizai Newspaper 2011.10.13/2012.3.26/2012.3.31/2012.4.4 | |
| (Notes) 1-1. | The sales in Korea in 2011 totaled 1,475,000 vehicles (excluding imports), up 0.6% from the previous year. The figure for the January-March 2012 period registered a 9.2% year-on-year decline. In contrast, the imported vehicle sales increased 12.0% to 118,000 units in 2011 and 13.9% in the January-March 2012 period. |
| 1-2. | Hyundai Motor Group used to divert its high profits resulting from the high market share in Korea (79.8% in 2011, excluding imports) to investing in its operation in other countries. If the domestic sale remains sluggish, it reportedly will affect Hyundai Motor Group's global strategy as well. |
| 2. | The Won exchange rate is another factor having a direct impact on exports. The rate declined from about 13 yen to 100 Won in 2007 to slightly over 6 yen in 2008. This rate remains virtually unchanged through today. It was 7.3 yen to 100 Won in March to the beginning of April 2012. |
Introducing new models in succession to refresh product portfolio in 3 to 4 years
Hyundai Motor Group introduced new models of higher quality and commodity value in succession in the past three to four years to refresh its lineup.
To improve the efficiency and reduce costs of new model development, the group plans to reduce the number of platforms from eighteen in 2009 to only six in 2013. With the remodeling of the new Elantra and other main models that were launched in and around 2011, the ratio of the new vehicles built on the new integrated platforms rose from 13.0% in 2009 to 23.3% in 2010 and finally to 62.1% in 2011. The platform integration apparently contributes to Hyundai's profitability along with the high plant utilization ratios.
The new-generation models launched in and after 2008 account for 87% (Hyundai models) and 95% (Kia models) of the Hyundai Group's automobiles sold in the US market in 2011.
Platform Integration
| 2002 | 2009 | 2011 | 2013 Plan | |
|---|---|---|---|---|
| Integrated Platforms | 0 | 6 | 6 | 6 |
| Total number of Platforms | 22 | 18 | 11 | 6 |
| Total number of Models | 28 | 32 | 36 | 40 |
Related indices
| 2002 | 2009 | 2010 | 2011 | 2013 Plan | ||
|---|---|---|---|---|---|---|
| Model development time (months) | 40 | 33 | 24 | |||
| Ratio of models with new Platform | New Platform | 13.0% | 23.3% | 62.1% | ||
| Old Platform | 87.0% | 76.7% | 37.9% | |||
| Gross Profit Margin | 22.3% | 23.5% | 24.3% | |||
Source: ：Hyundai Motor Investor Presentation February 2012
2011 Sales of the models launched in the US market in 2008 to 2011 |
| (Hyundai Equus, Veloster, Kia Borrego, Soul, and Forte are newly-introduced models, others are fully-remodeled models) |
| Hyundai brand vehicles | Kia brand vehicles | |||||
|---|---|---|---|---|---|---|
| Model | Segment | US sales in 2011 | Models | Segment | US sales in 2011 | |
| 2008-2009 | New Genesis New Genesis Coupe | Lower luxury | 32,998 | Borrego Soul Forte | Middle SUV Upper small Upper small | 429 102,267 76,295 |
| 2010 | New Sonata New Tucson Equus | Lower middle Small CUV Middle luxury | 225,961 47,232 3,193 | New Sorento New Optima New Sportage | Middle CUV Lower middle Small CUV | 130,235 84,590 47,463 |
| 2011 | New Elantra New Accent Veloster | Upper small Lower small Small specialty | 186,361 55,601 9,284 | New Rio | Lower small | 20,111 |
| Total sales of the above models Ratio Total Hyundai brand vehicles | 560,630 86.8% 645,691 | Total sales of the above models Ratio Total Kia brand vehicles | 461,390 95.0% 485,492 | |||
| 2012-2013 | New Azera New Santa Fe New Veracruz | Upper middle Middle CUV Middle CUV | Cadenza New Forte New Soul New Sorento New Sedona | Large Upper small Upper small Middle CUV Small van |
|---|
Source: Hyundai and Kia Press Releases. Segmentation according to Ward's Automotive Yearbook
Hyundai Motor refreshes designs and introduces luxury models under Hyundai and Kia brands
Starting with the new Sonata that was launched in 2009, Hyundai Motor has been adopting in many models what is called the "fluidic sculpture design language," a daring design with a long slit along the side of the vehicle having a low roofline. Hyundai changed the vehicle's design entirely at the time of full remodeling without worrying about keeping the impression of the previous model.
Hyundai Motor launched the rear-wheel drive Genesis sedan, Genesis coupe and Equus in 2008 to 2010. The Genesis earned the 2009 North American Car of the Year award.
Kia Motors that used to produce mainly small cars launched a midsize sedan Optima (K5 in Korea) in 2010 which turned out to be popular in the US market with 84,590 units being sold in 2011. The company is launching in Korea, in the first half of 2012, its first rear-wheel drive model, K9. Kia Motors is following the policy to expand its lineup and enhance the brand value as is Hyundai.
Hyundai's brand value: Structural improvements in the US market
Taking the US market as a typical example, Hyundai Motor says it is experiencing a virtuous cycle of improvements in both qualitative and quantitative aspects with its Hyundai brand business where "enhanced brand value" leads to "sales growth" which in turn leads to a "reduction in incentives" resulting in an "increase in the average selling price (ASP)" which leads back to enhancing the brand value.
For instance, the company's best-selling car in the US, the Hyundai Sonata, topped the 200,000 unit sales mark in 2011 for the first time by selling 226,000 units. Its actual transaction price was about 20% lower than that of Toyota Camry or Honda Accord until 2009 but slightly rose higher than the competitions in 2011. The actual price of the Elantra, Hyundai's compact model, was US$19,600 in 2011 which was higher than the Corolla and the Civic.
Hyundai Motor's incentives in the US market had fallen to US$1,005 per car in 2011.
In the retention rate research conducted by J.D. Power in 2011 (the rate at which automotive brands retain their existing customers), the Hyundai brand came in the first place at 64% among the 33 brands represented in the US. Kia Motors also scored high and came in the fifth place at 59% (industry average was 49%).
Structural Improvement
| 2008 | 2009 | 2010 | 2011 | ||
|---|---|---|---|---|---|
| Unit sales Market Share (Note 1) Incentive per new vehicle sold ($) | 401,742 3.0% 2,194 | 435,064 4.2% 2,506 | 538,228 4.6% 1,649 | 645,691 5.1% 1,005 | |
| Sonata | Unit sales Market Share Average selling price ($) | 117,537 5.7% 18,266 | 120,028 7.3% 18,019 | 196,623 11.4% 21,821 | 225,961 11.9% 23,148 |
| Retention rate (Note 3) | Rate (%) Ranks | 47% 13 | 47% 11 | 60% 3 | 64% 1 |
| Source: ：Hyundai Motor Investor Presentation February 2012 | |
| (Notes) 1. | The market share is the share in the light vehicle market in the US. |
| 2. | The Elantra was chosen the 2012 North American Car of the Year for its EPA fuel efficiencies (29 mpg city/40 mpg highway/33 mpg combined), the daring Fluidic Sculpture Design, compact body with a roominess that normally belongs to midsize cars, and the local production at the company's Alabama plant. |
| 3-1. | Retention rate is the rate at which automotive brands retain their customers. |
| 3-2. | According to J.D. Power that conducted the research, Hyundai brand's remarkable progress is resulting from (1) lineup expansion to constantly offer new models in succession (especially the new Sonata and the new Elantra) and (2) on-going improvement of the brand image. |
Hyundai Group's business results: Faster growth of sales revenues than sales volume, profits than revenues
Starting in 2011, the listed companies in Korea are required to prepare their financial reports according to the new financial reporting standards, K-IFRS (Korean version of IFRS, the International Financial Reporting Standards) rather than to the conventional K-GAAP standards. The new standards have removed Kia Motors from Hyundai Motor's consolidated accounting and Kia has published its own consolidated financial statements.
Hyundai Motor reported sales revenues of 77,798 billion Won (US$ 68.244 billion at 1,140 Won to 1 Dollar) with net profit at 8,105 billion Won (US$ 7.110 billion).
The growth rate of revenues (16.1%) was higher than that of the shipped quantities (14.9%). The growth rate of net profit (35.1%) was still higher. These indicate improved efficiencies resulting from the increased sales of mid and higher class cars and from the platform integration and increased plant utilization rates.
Kia Motors reported sales revenues of 43,191 billion Won (US$ 37.887 billion, up 20.6%) along with net profit of 3,519 billion Won (US$ 3.087 billion, up 30.4%).
Financial Summary |
| (KRW Billion) |
| Non-consolidated (K-GAAP) | Consolidated (K-IFRS) | ||||||
|---|---|---|---|---|---|---|---|
| 2007 | 2008 | 2009 | 2010 | 2010 | 2011 | ||
| Hyundai Motor | Revenue Operating Profit Recurring Profit Equity Earnings Net Profit | 30,620 1,946 2,222 445 1,682 | 32,190 1,877 1,795 21 1,448 | 31,859 2,235 3,781 1,337 2,962 | 36,769 3,227 6,308 2,801 5,267 | 66,985 5,918 7,492 1,682 6,001 | 77,798 8,075 10,447 2,404 8,105 |
| Kia Motors | Revenue Operating Profit Pretax Profit Equity Earnings Net Profit | 15,949 (55) 25 325 14 | 16,382 309 68 548 114 | 18,416 1,144 1,700 814 1,450 | 23,261 1,680 2,776 1,106 2,254 | 35,827 2,490 3,323 982 2,698 | 43,191 3,525 4,722 1,161 3,519 |
| Source: Two companies' 2011 Financial Results | |
| (Notes) 1-1. | Subsidiary companies owned 30% or more by the largest shareholder are consolidated in the largest shareholder's financial settlement under the K-GAAP. The percentage is raised to 50% under the K-IFRS. Hyundai Motor's controlling share in Kia Motors is 33.99% as of December 31, 2011. |
| 1-2. | For the above reason, Kia Motors, Hyundai Hysco and other subsidiaries were removed from Hyundai Motor's full-consolidation under the K-IFRS. These subsidiary companies are subject to the equity method whose equity profits are reflected in Hyundai Motor's consolidated net profit. Kia Motors also published its consolidated financial statement based on the K-IFRS. |
| 2. | In the non-consolidated statements for 2007~2010, "recurring income" under Hyundai Motor represents "pretax profit" and "pretax profit" under Kia Motors represents "recurring income." |
Hyundai Motor's Consolidated Results (K-GAAP) |
| (KRW Billion) |
| Consolidated (K-GAAP) | |||||
|---|---|---|---|---|---|
| 2007 | 2008 | 2009 | 2010 | ||
| Hyundai Motor | Revenue Operating Profit Pretax Profit Net Profit | 69,602 2,848 2,609 1,600 | 79,736 3,072 1,497 1,093 | 91,463 5,620 5,558 4,043 | 112,590 9,118 10,452 7,983 |
(Note) Consolidating subsidiaries such as Kia Motors and Hyundai Hysco.
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