Hyundai faces tough decisions in China where plummeting sales have cast a pall over blockbuster year globally
- A lacklustre performance is raising questions about Hyundai’s future in the world’s biggest automobile market
- The carmaker now commands less than 2 per cent of the Chinese market, down from about 10 per cent in its heyday in 2009
The Korean carmakers’ sales there have dropped off a cliff amid a fierce price war and a rapid transition to electric vehicles. The impact is apparent, with Hyundai cutting its manufacturing facilities in the country by more than half and reducing its line-up to eight mainly luxury brands, down from 13.
Their success outside China is raising questions about how they should operate within it.
01:29
Hyundai to exit Russia as Western sanctions on imports hinder production lines
“To increase market share in China, Hyundai would have to reduce supplies to US and Europe,” said Kim Jin-Woo, an analyst at Korea Investment and Securities in Seoul. “Should they sacrifice the high margins in those markets? I’m not sure.”
Japanese and German carmakers are facing similar challenges in an effort to beat rivals such as Tesla and BYD. Last year, Stellantis NV shuttered its only Jeep factory in China, while Volkswagen and General Motors are struggling with tough competition from local makers.
But Hyundai is facing a dual dilemma in China: its prices are too high to win against domestic brands, while its perceived quality and reputation fall short of Japanese cars, according to Yale Zhang, the managing director of Shanghai-based consultancy Automotive Foresight.
Politics may have exacerbated the situation. Tensions have been running high since 2017, when a wave of anti-Korean sentiment took hold in China over the deployment of a US anti-missile system in South Korea. Retaliatory measures against Korean products, including Hyundai’s cars, went into effect.
The company never fully recovered. Auto sales began to slow and the market rapidly turned to EVs, said Zhang. China’s electric car market is now dominated by local brands, with Tesla the only foreign carmaker ranked among the top 10 EV makers in 2022, according to BNEF.
Hyundai remains committed to the Chinese market, and is focusing on improving sales momentum and brand perception, it said in an emailed statement to Bloomberg. It is offering diverse options including the popular sport utility vehicle Palisade and luxury Genesis models, while it is “dedicated to delivering Chinese customers the Hyundai EV experience, featuring unique technology and design,” it said.
Hyundai and Kia sold only around 300 new energy vehicles in total in China in 2022, compared to 1.8 million by BYD and about 439,000 by Tesla. That is much fewer than Toyota Motor’s 10,326 and Honda Motor’s 14,180. Hyundai’s popular EV Ioniq is not available in China, where it sells few models.
Hyundai pursued electrification faster and more aggressively than its Japanese rivals and some European carmakers, but it was far slower than Chinese players, said Kim Tae-Nyen, president at Mirae-Mobility Research and Service. It also suffered an early misstep, when honourary chairman Chung Mong-Koo – the father of current executive chair Chung Euisun – pursued hydrogen vehicles rather than battery-powered cars.
“Chung Mong-Koo didn’t expect the fast growth of EVs in China, so he didn’t invest in EVs and software,” Kim said. “Chinese carmakers have better self-driving technologies and offer a variety of options for EVs – from luxury to budget cars.”
Pulling out of the biggest EV market would undoubtedly hurt Hyundai’s image and could slow its progress as the world embraces clean energy.
“To be considered a loser in the EV competition, that reputation will go global eventually,” Zhang said.
