Hyundai Motor Looks to World With High Quality
By Ryu Jin
Staff Reporter
Hyundai-Kia Automotive Group, which suffered a series of difficulties at home and abroad last year, is stretching its wings wide again this year with the improved quality of its products and global management that is coming to fruition.
While it has been succeeding in its continuous endeavors to enhance brand images abroad, the group is also stepping up efforts to expand production bases across the world, from Asia to Europe and America.
Hyundai Motor, South Korea’s top automaker, exported a total of 1.03 million vehicles earning some $12.1 billion in 2006, which accounted for about 3.8 percent of the nation’s total shipments.
Sales also topped 27 trillion won ($29.1 billion), roughly 3.2 percent of the gross domestic product (GDP), leading the country’s economic growth last year.
Hyundai Motor and its affiliate Kia Motors produced more than 1 million vehicles in its overseas factories in the United States, India and China. In April, Kia completed a plant in Slovakia and Hyundai Motor started construction of another factory in the Czech Republic.
The leading automaker’s global strategies are also contributing to the national economy by strengthening cooperation with local auto parts firms and promoting related industries.
While operating overseas factories around the world, Hyundai-Kia Automotive Group has entered 110 countries along with South Korean firms related to the automobile industry, including Hyundai Mobis.
Hyundai Mobis, a subsidiary of the automotive group, has been operating large-scale factories in five countries overseas, manufacturing high-tech auto parts such as modules and airbag systems in accordance with the increased production of Hyundai cars.
It is now building two more plants in China, including Beijing, and is scheduled to construct more in Georgia, the U.S., and the Czech Republic in Europe, where Hyundai Motor factories are under construction.
Hyundai Mobis was the 20th largest auto parts company around the world in 2005. With the Hyundai-Kia Group’s endeavors to use more homegrown facilities in overseas plants, Hyundai Mobis now aims to emerge as one of the ``Top 10’’ global companies by 2010, according to its officials.
Global Leader
Established by the late Hyundai founder Chung Ju-yung in 1967, Hyundai Motor’s first model, Cortina, was released in cooperation with Ford Motor Company in 1968. At that time, few believed the half-fledged automaker would export cars to other countries.
It was in 1986 that the company made its first historic shipment to the United States, the home country of the automobile industry. In January 1988, the accumulated exports overseas topped 1 million vehicles.
Hyundai Motor first achieved the annual export of 1 million cars in 2003 and, in the following year, its cumulative exports topped 10 million vehicles in less than four decades since it began producing cars.
Since the early 2000s, the company has also been expanding its production lines in foreign countries, including China and India as well as the U.S. and Europe.
Hyundai Motor plans to increase the overseas production from last year’s 960,000 to 1.3 million this year. Yearly production in the Chennai factory in India will double from 300,000 to 600,000, while that of the Ismit factory in Turkey will increase from 60,000 to 100,000 this year.
By 2008, the company plans to increase the annual production capacity of its Beijing factory from 300,000 to 600,000 and the factory under construction in the Czech Republic, which will be completed in 2009, will also start to make 300,000 vehicles a year.
Hyundai Motor officials expect that the company, along with Kia Motors, will be capable of producing about 2.93 million cars in their factories abroad from the year 2010.
Despite its aggressive overseas businesses, however, the company has also been facing some difficulties such as a strong won, high oil prices and the intensifying competition in the global market.
Sales have remained stagnant in the recent three years since 2004. Hyundai Motor sold 1.61 million cars in 2006 at home and abroad, down 5.3 percent from 1.7 million in 2005.
In 2006, Hyundai Motor suffered a loss of about 1.15 trillion won ($1.24 billion) as the exchange rate decreased from 1,010 won per dollar early in the year to 930 won by the end of the year.
Quality, Quality, Quality
Facing such difficulties, Hyundai-Kia Automotive Group is doing its best to cope with the crisis. While trying to cut various costs on the one hand, it is also stepping up its efforts to improve quality of its products and fortify publicity activities on the other.
Most of all, the company has been exerting endeavors to develop high value-added vehicles to pull up its sales and net profits. Hyundai Genesis, which made its debut last April, presents the direction that the company should follow to survive the global competition.
Genesis is the concept model of a new RWD premium sedan, project-named ``BH,’’ which will be unveiled in December. Hyundai Motor aims to enter the premium car segment with the upcoming BH sedan.
The company’s image abroad has so far been confined to the recognition of a brand selling relatively low-priced economy vehicles, compared with the other global makers such as BMW, Benz and Toyota.
In the domestic market, small- and mid-size cars such as Click, Avante and Sonata allow about 10 percent of profit margin while such large cars as Grandeur gives some 15 to 20 percent.
Sales of the company topped 27.33 trillion won last year, but the operating profit remained at around 1.23 trillion won, which caused the company to focus more on development of high value-added premium models.
With the 3,800cc- and 4,600cc-class models, the BH luxury sedan is directly targeting BMW’s 5 series and Mercedes-Benz’s E-Class. Hyundai Motor plans to release the 3,800cc-model in the domestic market first and then export the 4,600cc model to the United States next year.
Hyundai Motor’s efforts to enhance the quality of its products have already been coming into fruition. Santa Fe has taken top place in the mid-size crossover sport utility vehicle (SUV) category six times in the past seven years in the annual Vehicle Satisfaction Awards (VSA) by AutoPacific Inc.
Motor Trend, the world’s leading car magazine, also praised the 2007 Veracruz in its July edition over Japan’s luxury SUV Lexus RX350. The Veracruz was rounded up as ranking first place in terms of design, interior, price and speed, beating out the Japanese crossover utility vehicle (CUV).
Officials said the Hyundai-Kia Automotive Group has a long-term vision to take a second leap in the coming years through enhancement of quality, development of new cars including hybrid vehicles and improvement of profitability, while coping actively with the exterior variables such as the fluctuating exchange rates.