Consultancy’s view about the Koreans
Consultancy’s view about the Koreans
After it began exporting cars to in 1986, Hyundai Motor became the butt of ridicule. Its vehicles enjoyed a couple of years of rising popularity, mainly because they were substantially cheaper than the competition’s, but then sales plunged. The company learned, the hard way, that rattles, engine and transmission problems, poor brakes and generally pitiful design aren’t big selling points.
A reputation for unreliability and abysmal quality helped keep the South Korean auto maker a bit player in the global auto market until the late 1990s. But in the aftermath of the 1997-98 Asian financial crisis, which threatened its survival, the company dramatically changed its tack. Hyundai made big investments aimed at improving its vehicles’ powertrains, design, reliability, quality and marketing.
Ashvin Chotai, director of Intelligence Automotive Asia, a London-based consultancy.At the other end of the spectrum, Hyundai’s emerging-markets strategy may be the industry’s broadest. Says Chotai: “GM and Volkswagen are big in China, Suzuki is big in India, and Volkswagen is big in Eastern Europe, but only Hyundai has a big footprint [in all of those] and the Middle East and North Africa,” as well.
The Korean company has nearly 7% of China’s market and 21% of India’s. Now it is trying to boost its presence in Latin America by building a plant in Brazil, the world’s fourth-biggest car market. Last year, Hyundai sold 106,000 cars in Brazil for a 3% share of the passenger-car market. Gregory Kim of Mirae Asset, a Seoul investment company, contends that the car maker could nearly triple its Brazilian sales by 2014. “Brazil is a huge opportunity for Hyundai,” he says.
Realizing that it would be a long, hard slog in developed markets, Hyundai early on targeted China and India as key platforms for growth. “They bet big on emerging markets, and the strategy has paid off handsomely,” says Sohn. “When people buy their first car in China or India, they are seeking value for money, or smaller cars with a low price tag and a good warranty,” he says. Emerging markets account for 54% of global sales, while the U.S. accounts for 18%, and Europe, 14%. With nearly 100% capacity utilization in emerging markets, Hyundai is rushing to boost annual production capacity by 300,000 vehicles in China, 200,000 units in Brazil, 80,000 in India and 50,000 in Russia.
Source:barrons
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