Hyundai Motor doubles efforts for South Asia expansion

Hyundai Motor‘s EXTER

South Korea’s Hyundai Motor has made significant strides in expanding its presence in the Indian subcontinent over the past five years. According to recent reports, the company has opened four completely knocked-down (CKD) assembly plants in India’s vicinity alone.

CKD assembly is a method preferred by automotive manufacturers when entering emerging markets due to its cost-effectiveness compared to producing fully assembled vehicles.

Under the leadership of Chairman Chung Eui-sun, who has visited India twice in the past year alone to bolster the company’s market penetration efforts, Hyundai Motor has not only focused on capturing the Indian market but is also intensifying its efforts to tap the South Asian countries bordering India.

Industry sources revealed on Wednesday that Hyundai Motor inaugurated new passenger car assembly plants in four South Asian countries over the past five years. Following its expansion into Pakistan, the second-largest South Asian market, in 2020, Hyundai Motor ventured into Bangladesh, the third-largest market in the region, in 2022, followed by Sri Lanka in September 2023, and Nepal in March 2024. Hyundai has opened a total of six assembly plants overseas during this period, with CKD being one of the assembly methods employed. This method involves exporting products in a semi-assembled state, which qualifies it for lower tariffs compared to fully assembled vehicle exports and thus enables the carmaker to reduce local selling prices as well as save on transportation costs.

Hyundai Motor has leveraged these advantages in its overseas expansion strategy, which was primarily focused on Southeast Asia until the late 2010s. The company expanded into Laos and Myanmar after opening its first plant in Vietnam in 2011 and opened a second passenger car production plant in 2022 after setting up a commercial vehicle assembly plant in 2018, surpassing Toyota to claim the top spot in the Vietnamese market in 2023.

The decision to replicate this strategy in South Asia stems from the region’s high potential market value compared to Southeast Asia. Countries like Pakistan, Bangladesh, Sri Lanka, and Nepal, with a combined population of over 500 million, still exhibit relatively subdued activity in the new car market.

Bangladesh, with a population of approximately 174.7 million, has historically been dominated by the sale of used cars, accounting for around 80 percent of total vehicle sales. But recent trends indicate a shift, with the proportion of new car sales increasing from a mere 7 percent of total vehicle sales in 2016 to 16 percent in 2020, according to market data.

The proximity of these markets to India also allows Hyundai Motor to apply a similar sales strategy that has already yielded commendable results in the Indian market.