Hyundai Motor tries U-turn in China strategy

Hyundai Motor Group achieved record-breaking sales in the United States and Europe last year -- while floundering in China.

Ryu Chang-seung, head of Dongfeng Yueda Kia, gives presentation about Kia's strategy in Chinese auto market at Guangzhou Auto Show in November 2021. [NEWS1]

Hyundai Motor Group achieved record-breaking sales in the United States and Europe last year -- while floundering in China.

It sold 477,282 units in China in 2021, 28 percent fewer than in 2020, according to data compiled by the China Passenger Car Association (CPCA).

Its average monthly sales were 39,700 units -- less than a third of its average in 2016.

Its market share in China is 2.7 percent, or 12th among carmakers.

In 2011 it had 6 percent of the market and it was No. 3.

What went wrong with Hyundai Motor in China?

━ It started with Thaad

The automaker’s decline started in 2017 when South Korea decided to deploy the U.S.-led Terminal High Altitude Area Defense (Thaad) antimissile system despite very clear and strong objections from Beijing.

China reacted with unabashed economic retaliations against Korea and its companies. It told tour agencies not to send group tours to Korea. It yanked Korean pop stars from the Chinese airways.

And it encouraged a boycott of Korean products, ranging from cosmetics to cars.

Hyundai Motor Group's sales of 1.8 million units in 2016 fell by 36 percent the next year. Except for a slight rebound in 2018, sales never recovered.

The Korean automaker has been looking for a strategy to win back Chinese customers.

In April 2021, it said it would launch 21 electric models by 2030, launching at least one model every year. It said it would establish a local R&D center and start selling its first fuel-cell electric vehicle, Nexo, in 2022.

Lee Kwang-guk, who headed Hyundai Motor Group’s Chinese operations since 2019, resigned last year and was replaced.

It hoped to use Genesis, the Korean automaker’s luxury brand, as a way of reestablishing itself in the market.

It world-premiered its first-ever electric Genesis, the Electrified G80, in China last April. That was a big departure from Hyundai's long-standing tradition of premiering new models at home.

The Electrified G80 was unveiled at the Shanghai International Automobile Industry Exhibition in April 2021 at an extraordinary evening event with thousands of drones and a light show.

The company made a public pledge to bring the most inspiring Genesis experiences to its Chinese customers.

Genesis celebrated it official entry to Chinese auto market in April 2021.

━ Wrong marketing

Despite such efforts, sales have remained flat and some analysts say there was a mistake in the automaker’s marketing strategy from the very start -- in 2001.

“When it first entered the market, Hyundai Motor offered its vehicles to Chinese taxi drivers and its brand image was hurt,” said Kim Yong-jin, a former chair of the Korean Academy of Motor Industry and current professor of business administration at Sogang University, "leading directly to the automakers’ sales plunging.

“When the Chinese auto market went crazy about high-tech systems in recent years, Hyundai Motor did not respond to it properly as well.”

Hyundai Motor had originally intended to focus on sales of small and mid-sized sedans, but faced a lot of competition from local brands.

Chinese auto brands accounted for 46.6 percent of the country’s auto market last year, a significant jump from the previous year's 41.1 percent, according to CPCA data.

The SUV market is dominated by Japanese brands such as Toyota and Nissan.

Hyundai Motor and sister company Kia made efforts in the electric vehicle (EV) market -- the largest EV market in the world -- with tepid results.

Hyundai launched various eco-friendly models including the Mingtu EV, Lafesta EV and Encino EV, but their sales came to a mere 2,397 units last year. Tesla is reported to have sold 440,000 EVs in China last year.

“The Chinese have a culture of not wanting to buy a vehicle that is used for taxi fleets,” said Lee Hang-ku, a senior researcher at the Korea Institute for Industrial Economics and Trade. “Hyundai Motor seems to have neglected that culture and offered its flagship model Sonata for local taxi fleets.”

Pricing also was a problem.

“Hyundai Motor cars don’t have as good reputations as Japanese cars in China but in terms of pricing, they seem to have made a mistake,” said Lee Ho-geun, professor of automotive engineering at Daeduk University.

“Hyundai Motor’s Tucson midsize SUV sells for between 34.8 million won and 42.3 million won while Honda’s CR-V sells for between 31.8 million won and 43.4 million won.”

━ A+ in United States and Europe

In sharp contrast, Hyundai Motor and Kia are doing better than ever in the United States and Europe.

The sister companies sold 1.48 million units in the United States last year, an all-time high and 21.6 percent higher than the year before. Its previous record was 2016's 1.42 million units.

It was the first time the Korean automakers outsold rival Honda since entering the U.S. market in 1986. Hyundai Motor Group ranked in fifth place in the U.S. auto market last year and Honda was sixth.

In Europe, the sister companies sold 1 million units last year. Hyundai Motor had a 4.4 percent market share and Kia 4.3 percent, European Automobile Manufacturers' Association data said.

Combined, Hyundai and Kia ranked fourth with 8.7 percent market share, outperforming BMW Group, which trailed in fifth spot with a market share of 7.3 percent.

Among the top five players in Europe last year, Hyundai Motor Group was the only one to post growth. Others suffered from pandemic problems and an auto chip shortage.

No. 1 Volkswagen Group saw a 3.7 percent drop in sales last year. Stellantis and Renault Group, the No. 2 and No. 3 players, saw growth shrink 1.6 percent and 10.9 percent respectively.

BY MOON HEE-CHUL, JIN EUN-SOO [jin.eunsoo@joongang.co.kr]