Hyundai Motor going local in Russia

Dealerships expanding, assembly boosted, PR efforts strengthened

By Kim Da-ye

Moscow ― Hyundai Motor intends to go local in developing its business in Russia.

Korea’s largest carmaker said Saturday that it will produce small-size vehicles tailored for the Russian market starting in January 2011 at a newly built plant in Russia while launching a series of new models that will better suit the needs of local consumers.

Hyundai will also expand its dealership network by hiking the number from 120 locations in 2009 to 160 in 2012 and advance its brand awareness with aggressive marketing activities including the opening of a brand shop in downtown Moscow.

Localization is much in need as Russia remains a large yet protected market for foreign car manufacturers.

In 2008, Russians bought 2.9 million vehicles, 69.7 percent of which were non-Russian brands. The figure plummeted to about 50 percent to 1.47 million in 2009 during the global financial crisis, but is climbing again along with the economic recovery.

Hyundai Motor saw its sales in Russia increasing from 100,685 cars in 2006 to 192,719 in 2008, but plunging to 74,607 in 2009. The automaker aims to sell 90,000 this year ― 75,000 being imported and the rest being complete knock downs (CKDs). A CKD is an entire kit of car parts imported from Korea and assembled in Russia, partly to receive tax benefits.

In order to raise the figure Hyundai faces increasing pressure to open local assembly lines. The Russian government raised tariffs on imported cars from 25 to 30 percent last year. It also provided buyers of Russian-made cars with a 50,000 Russian Ruble ($1,614) subsidy. None of Hyundai’s complete vehicles exported from Korea benefit from the policy while its CKDs do.

Producing vehicles locally is Hyundai’s main strategy along with a larger distribution network and more ambitious marketing backing it up.

The automaker will launch the Russian-market specific vehicles with the codename RBr. It belongs to the C segment, the same as Avante, Verna or i30, which accounts for 50.4 percent of cars sold in Russia.

“By varying the specifications and prices of RBrs, we want to serve not only customers for C-segment cars but also those for the B-segment in order to achieve the highest sales in the category of small vehicles,” said a Hyundai Motor official.

“We will launch large-scale television and outdoor advertisements and strengthen public relations activities here. We want to focus on making our first “made in Russia” cars succeed and effectively localize so as to make it Russia’s best model.”

The automaker will also focus on selling the new model of its Tucson because sports utility vehicles which are popular in Russia due to the heavy snowfall there. Also on the cards is the Sonata, Hyundai’s flagship model.

To back up this plan, the company says it will open more dealerships and make them bigger. One of the newly opened mega dealers is Genser Hyundai Motor Dealership located on the outskirts of Moscow. The dealership sits on a floor space as large as 11,000 square meters and has a staff of 120.

Early Saturday morning, several customers were already visiting the showroom, checking out the vehicles.

“In the last five years, the sales of Hyundai cars have hugely increased, and brand awareness has improved,” said Genser manager Andrey Forkin. “The Russian middle class has been strengthening its base for 10 years now. Hyundai Motor has grown with them.”

Furthermore, Hyundai became the first foreign car manufacturer to open a showroom on Tverskaya Street, just 300 meters away from the Kremlin, in May this year. It exhibits high-end sedans including the Equus.It was built to lure VIP customers.

In Moscow, one can see Hyundai’s best-seller Getzs without difficulty. A total of 13,607 were sold between January and August, resulting in 25.5 percent of Hyundai’s sales in Russia.

Gnatik Andrey, a 31-year-old Moscow resident, who visited the Genser dealership with his girlfriend, says that he would consider buying an i30 while his girlfriend plans to buy an i20.

“On the Internet, I read feedback about the cars. They say that the quality of Korean cars is better than those of Opel or Nissan and also cheaper,” said Andrey.