Hyundai Motor sacks executives amid struggles

By Park Jin-hai

Tan Tao-hung, head of China business strategy for Hyundai-Kia

Hyundai Motor Group, Korea’s biggest automaker, has sacked several senior executives in China as part of a corporate strategy to reverse falling sales in the world’s largest auto market.

In a rare mid-year reshuffle of management, Sichuan Hyundai Motor’s Sales Division Vice President, Tan Tao-hung, was named new head of China business strategy for both automakers.

Lee Byung-ho, vice president at Hyundai WIA, will be responsible for handling Hyundai's main joint venture in China, Beijing Hyundai Motor. Kim Gyun, vice president at Kia Motors, was given a mission to put its affiliate, Kia's China joint venture, Dongfeng Yueda Kia Motors, on track as quickly as possible, the company said Wednesday.

In a measure to take full responsibility for the continued sales slump in China, the outgoing executives were demoted.

“It is a move to change the organizational atmosphere in our China business as well as strengthening our ability to cope with market changes in China,” a company spokesman said.

Whether such radical changes will make things better for the Korean automaker is questionable because Hyundai is facing stiff competition from cheap Chinese auto brands and the rise of its chief Japanese rivals, which are becoming competitive because of the lower yen, said market analysts and officials.

They say Hyundai also was late in cutting prices for some of its sport-utility vehicle (SUV) models in China.

“Hyundai slashed prices of its SUV models in China, however, that measure should have been implemented one month ahead,” said an analyst in Seoul, asking not to be identified.

Hyundai Motor has seen sales cut by half over the past four months.

Sales in July stood at 54,160 cars, down 32.4 percent from a year earlier, while Kia Motors sales dropped as much as 33.3 percent to 30,008 during the same period. The combined sales of Hyundai-Kia Motors in July amounted to 84,168 units, which is half the March sales of 161,553.

As a result, Hyundai-Kia’s combined market share fell below 7.3 percent in June and its July sales are now forecast to hit below 7 percent.

Hyundai’s China plant was running at 107 percent capacity in the first quarter, but the sales contraction has seen it drop to 88 percent in the second quarter.

The carmaker is expecting a rebound in China with the new Tucson in September and the new K5 in October.

Lee Jae-il, an analyst at Shinyoung Securities, said it is likely Hyundai’s Chinese units will not turn profitable soon.

“As Japanese companies are cutting their vehicle prices as well, it puts pressure on Hyundai,” said Ko Tae-bong, an analyst at HI Securities. “To avoid the immediate risk, the price cut should expand through all its lineups, including their luxury cars. After getting rid of all the old stock, however, all those models should be replaced with strategic models by 2017 at the latest.”

A Hana Daetoo Securities analyst said Hyundai’s China recovery is a hard task, citing China’s automotive sales overall dropped 3 percent last year, year-on-year, and it has been posting minus growth since June.

In comparison, General Motors, which is competing with Hyundai-Kia Motors for second place in sales, saw its market share rise 1.7 percent to 10.2 percent in June, while Ford has increased its market share to 5.6 percent from 4.3 percent from the previous month.