Hyundai: A Brief Introduction
Hyundai, based in Seoul South Korea is among the leading global automobile brands. It also owns a significant stake in another Korean automobile brand Kia Motors. The company has achieved significant global growth and expanded its business in the global automobile market through a focus on innovation and customer satisfaction. Hyundai’s impressive product portfolio includes a nice range of products including family cars, crossovers and SUVs.
The company has achieved fast growth in recent years. Worldwide its growth has been driven mainly by its focus on innovation. Apart from making fuel-efficient and safer cars, the company has invested in cars that are attractive and environmentally safe. Its subsidiary Kia and Hyundai both emerged as winners during the pandemic when most car brands experienced a heavy decline in sales. It proved their resiliency during a period when economic recession and supply chain disruption were driving sales down throughout the automobile industry. Hyundai’s strategy has been to focus on customer needs and expectations and to innovate so that its products fit into their needs and lifestyles.
The company has expanded its line of electrical and hybrid cars and continues to grow its focus on electric mobility since it is the future of transportation. Tesla’s rise in 2020 showed that the future of mobility was electric. Hyundai has also made some significant progress in this area. It is investing in electric mobility and latest technologies to deliver superior results.
In this SWOT analysis, we will focus upon the key strengths and weaknesses of Hyundai. Apart from that, will also analyze the opportunities before the brand and the key challenges it is facing and needs to address.
Hyundai is a South Korea based automobile giant. The company was founded in 1967 and is among the leading automobile products in the world. It is also the largest car manufacturer in its domestic market South Korea. Korea is also the largest market for Hyundai products. The chairman of the company is Euisun chung and its President is Eon Tae Ha. The automobile brands in the Hyundai Motors Group include Hyundai Motor Co. and Kia Motors Corp and Genesis. The company generated ￦ 104 trillion in 2020 in net revenues.
Brand image :
Hyundai is a South Korean automobile brand with a global sales and distribution network. The company’s main strength is its brand image that is based on product quality, the safety of its products, performance, and customer service. Overall, Hyundai has maintained a strong brand image as a leading global automobile brand. The Hyundai Motors group (Including Kia Motors) is among the largest vehicle manufacturers globally. Despite the decline in sales due to the pandemic in the US, Hyundai’s market share in the United States remained intact. The Hyundai Motors group has brought a large range of cars including a nice range directed at the middle-class consumers and priced competitively. The other factors that have helped the company maintain a strong brand image include its focus on sustainability, passenger safety, product innovation, a nice range of electric cars and hybrids, and a global network of distributors.
Global Presence :
Hyundai is a global brand of automobiles. It has expanded its sales, distribution, and service network globally. The South Korean Automobile brand has expanded its presence worldwide. The company sells its product line across more than 200 countries. Founded in 1967, Hyundai Motors is the largest automobile manufacturer in South Korea which is also its largest market. The Korean market accounts for the largest portion of the company’s annual net revenue followed by North America and Europe. The company has continued to strengthen its global distributor network. You can find an exhaustive list of the markets where the company has its distributors located here.
Strong business model:
Hyundai has a strong business model and its resilience was proved during the pandemic. While a large number of automobile brands struggled to beat the impact of the pandemic and experienced a severe decline in sales and revenue, Hyundai and its subsidiary Kia Motors emerged relatively unscathed. Other global brands faced huge difficulties and sales and service as well as the manufacturing disruption caused by the pandemic. The way the pandemic disrupted supply chains globally had a severe impact on the manufacturing and sales of the automobile companies.
Their revenues were also significantly impacted due to lower unit sales. While Hyundai also experienced a decline in unit sales, its revenue remained flat in 2020 compared to the previous year. The net revenue of the company was down to ￦ 104 trillion in 2020 to ￦ 107.75 Trillion in 2019. Its strong performance in 2020 proved the company’s resilience during difficult times. It was a phase of major difficulties for automobile brands, several of which had to shut down manufacturing in various regions because of supply chain disruption and the unavailability of raw materials. Hyundai was also able to maintain its market share in leading markets despite the pandemic.
Supply chain management :
Supply chain management is an important part of the overall business strategy of any automobile brand. All large automobile businesses globally whether located in the US or in South Korea have to manage their supply chains strategically to ensure a seamless supply of raw materials and parts. The company sources parts and raw materials from thousands of suppliers around the world. It strives to manage strong long-term relationships with its suppliers. The company sources from thousands of suppliers located in various corners of the world and mainly in Asia. Its strong focus on supply chain management enables the company to produce superior car models that are better in terms of performance and efficiency.
Product portfolio :
Hyundai’s large product portfolio is also a key strength for the brand. The company has a large and diverse product portfolio that includes sedans, SUVs, crossovers, electric cars and hybrids. The company has maintained a strong focus on product innovation to bring car models that satisfy people’s needs but are also the best in terms of performance and passenger safety. The company has expanded its line up of electricals and hybrids to at least 10 models. They include Kona, Nexo, IONIQ and the plugin hybrid variants of Elantra, Tucson, and Santa Fe.
Pricing strategy :
Hyundai’s pricing strategy is also a key factor that has led to the company’s worldwide success. The automobile industry has grown highly competitive and a large number of companies that make passenger cars have expanded their lineup of car models targeted at middle-class consumers. Hyundai has also mainly focused on middle-class consumers and introduced a large number of vehicles in the affordable and affordable luxury segment. Its competitive pricing strategy has helped it maintain its competitive edge in a hypercompetitive industry environment. Growing competition has led to higher pricing pressure on automobile businesses. However, competitive pricing helps gain sales and it is also an effective method of promoting a responsible and customer-friendly brand image. If Hyundai was able to sustain sales level during the pandemic, its pricing strategy is also an important reason behind it. Hyundai delivers value for money to its customers. So, the company has introduced vehicles that are excellent in terms of performance and also priced affordably. This has helped the company maintain its market share in markets like the US and India without any difficulty.
Research and development :
Hyundai is a highly competitive automobile brand with a strong competitive edge. The company has focussed on making automobiles that are great in terms of performance, attractively designed and safe for riders. Since the automobile industry is seeing higher competition, maintaining a brand’s competitive edge requires more focus on innovation. Technology has driven several major changes in the automobile industry including improved performance of vehicles, super manufacturing capabilities and more streamlined business operations. Digital technology and AI are also driving important changes throughout the industry.
To maintain its market share and growth momentum and to beat the competitive pressure, the company has maintained a strong focus on research and development. Every year, it invests a large sum in R&D and has established a string R&D network to develop new technologies and vehicle models.
Manufacturing network :
Hyundai has also established an extensive manufacturing network that is among the most attractive in the world. It owns one of the world’s largest automobile plants which is located in Ulsan, South korea. According to Wikipedia, Hyundai operates the world’s single largest integrated automobile manufacturing plant with an annual capacity of 1.6 million units. According to Statista, the plant produced 1.5 million vehicle units in 2020. Hyundai has also established two more plants in Asan and Jeonju in South Korea. Apart from it, it has established more manufacturing plants in various markets to cater to local demand through them. It has established plants in the following locations : Russia, China, Brazil, India, Turkey, Czech Republic and Alabama, United States.
Heavy decline in the Chinese market:
China surpassed the United States to become the largest automobile market in the world some years ago. However, Hyundai Motors group has not been lucky enough in this market compared to most other large automobile markets where it sells its products including the US and India. Compared to the early 2010s, the market share of the company has kept shrinking in recent years. According to Statista, the market share of Hyundai in the Chinese automobile market shrank from 9.8% in 2011 to 2.7% in 2018. China is strategically a very important market for automobile brands and any brand that has nailed the world’s largest market will experience significant revenue growth. According to other sources, Hyundai and Kia Motors together posted their heaviest operating loss in the Chinese market in 2020. Together the two sold 664,744 vehicles in China, which was 26% lower compared to the previous year. The two java together posted operating losses worth 2 Trillion Korean Won. Hyundai’s fall in China began after a government backlash against the Korean companies in 2017. Compared to 2016, they sold only one-third of vehicle units in China.
While electric mobility is a promising area for automobile businesses, it is not without risks. Especially, if a brand is forced to make recalls, the costs can be very high. It has been proved this year in the case of Hyundai. The company is making recalls of electric vehicles worth $900 million or 1 trillion Korean Won. According to CNN, the recall involving around 82,000 electric cars is going to cost the company around $11,000 per vehicle unit. This is among the costliest in the history of the automobile industry. GM had also made a recall recently that was worth $1.2 billion overall. However, its per vehicle cost was only $200. The average per vehicle cost that Hyundai is going to bear is comparatively an astronomically high number. Hyundai will need to replace the entire battery in each vehicle. It is why the cost of the recall will be so high for the company. Battery safety and durability are important for automobile companies, which means the costs of research and development for Hyundai will also grow in the future. The cost of making electrical vehicles will also remain high for the company until it can bring them down through mass production and economies of scale.
Weak marketing execution:
Hyundai has mostly relied on its brand image, innovation, and product quality to gain publicity and word of mouth. While its focus on making reliable vehicles has led to a stronger brand image, higher sales and increased popularity, the company has been less aggressive in terms of marketing and promotions compared to the other leading brands like Ford or GM, and Toyota. The automobile industry is experiencing heavier competition compared to a few years ago and brands are aggressively investing in paid promotions to gain sales and market share. Hyundai is not using a focused marketing strategy, which is essential if it wants to become the long-term winner in the US and Indian markets. Apart from using digital channels to create higher brand awareness, the company must also focus on branding to grow its market influence. The marketing strategy of the company also lacks a global feel and while Hyundai is a global brand, its marketing execution is relatively weaker compared to the brands it is competing against.
Digital marketing and customer engagement:
Hyundai needs to realize the criticality of marketing to winning in the long term. Since it is pitted against large rivals like Ford, GM, Volkswagen, and Toyota, without maintaining its focus on marketing, it could find its influence waning in several key markets. It has already lost significant market share in China and its efforts to revitalize its sales there have also failed. However, in the rest of the markets including its home turf, India, and the United States where its sales are strong, the company must focus on marketing and customer engagement using digital channels to grow its penetration and attract more middle-class customers.
Automobile companies are investing in the latest technologies to make their product lines more attractive and improve the performance of individual products. Hyundai must also continue to focus on the latest technologies so that its products continue to outperform the rivals in the global market. AI, automated driving, and electric mobility are some of the hottest areas where companies are investing most of their R&D money.
Focus afresh on Chinese market:
Hyundai lost its grip on the Chinese market some years ago. However, while government backlash was cited as one of the main reasons behind its decline in sales in the Chinese market, the company is also quoted to have lost track of the local customers’ preferences there. Hyundai must focus on developing specific models that are most suited to the needs and expectations of the Chinese consumers. While the heavy drop in sales compared to 2016 is an indication of a probable future exit from the market, Hyundai is still not completely out of the race. It can still grow its share in the Chinese market by focusing afresh on the types of cars people want there. It is already winning in India with its Creta SUV becoming the best seller of 2020 with only a modest drop in sales during 2020 despite the turbulence the pandemic caused.
Electric mobility is the future of transportation and investing in this area can be highly profitable. Considering this, Hyundai has sharply grown its range of electric and hybrids. The sales of electric cars and hybrids have grown sharply around the world in 2020. In 20201, it is expected that the sales of electric cars will grow even higher. While Hyundai might have received a major setback in the form of recalls, it must not discourage the brand from innovating and building more efficient and safer electric cars. In Europe, electric car and hybrid sales are expected to grow at a fast pace in 2021. Based on how sharp the demand for electric cars has grown, Hyundai must not hesitate from investing more in the development of batteries and making its electric cars safer.
The main threat to Hyundai sales comes from the heavy competition in the global market. Hyundai has a large number of competitors in the global market including leading global brands like GM, Ford, and Toyota as well as the local brands in specific markets like India and China. The leading players in the automobile industry are investing heavily in research and development, marketing, and making their product line more attractive. The high level of competition is also the main barrier to faster growth in the global market and requires a higher focus on innovation. It is also driving operating expenses higher for Hyundai since the company needs to spend more on R&D, marketing, and sourcing good quality raw materials to beat the competitive pressure.
Worldwide, the automobile industry is among the most heavily regulated industries and companies have to focus on staying compliant in order to avoid any major fines. Apart from product quality and passenger safety related regulations, labor related regulations and environmental regulations can also hurt the bottom line if a company is found to be non compliant. In 2020, Hyundai and Kia reached a costly settlement related to defective engines in the US. Litigations can be costly for automobile businesses and fines can be millions of even billions, causing these brands heavy losses. It is why Hyundai needs to be cautious about the regulatory risks involved in its business worldwide in the individual markets where it operates or sells its products.
Growing operating expenses:
The operating expenses of automobile businesses including Hyundai have continued to creep up year over year as brands continue to grow their investment in research and development, marketing and product quality. Apart from the growing prices of raw materials, the increased competition in the automobile industry has also led to a growth in operating expenses of the automobile brands in various other areas including human resources.