Israel-Hamas war feared to hamper Hyundai's overseas sales, R&D expansion

Smoke rises from the northern part of the Gaza Strip as a result of an Israeli airstrike, Oct. 17. EPA-Yonhap

Hyundai Motor Group is facing growing risks of falling sales in the Middle East as the ongoing military conflict between Israel and Hamas will likely continue for the time being, industry officials said Tuesday. Operations at the group's regional research and development (R&D) center in Israel also appear to have ground to a virtual halt.

Hyundai is the top-selling automaker in Israel, with its affiliate, Kia, coming in second. Even if both automakers have yet to suffer serious damage from the outbreak of the armed conflict there, industry insiders said the Korean automakers may face multiple risks stemming from the possibility of a protracted war.

According to data from market tracker Focus2Move, Hyundai Motor sold more than 36,400 vehicles in Israel during the first eight months combined this year. This is the largest amount and accounts for a 15.8 percent market share there. The combined share of Hyundai and Kia reaches around the 30 percent mark in the country, surpassing that of Toyota by a huge margin. Hyundai has not set up any branch there, but operates its sales business there via agents.

“The war, in itself, will cause a negative impact on the sales of Hyundai’s vehicles there, but as the conflict is still at an early phase, the company will monitor carefully whether it escalates into a bigger scale,” said Kim Moon-tae, head of industry policy division at the Korea Chamber of Commerce and Industry. “We need to watch further, and companies there will take specific actions, if armed tension is heightened there.”

Another particular concern is that the war may impede Hyundai’s research activities, as Israel is a strategic base for the Korean automaker’s R&D. Hyundai Motor Group operates five "cradles" in five regions across the globe, as part of efforts to find promising tech-savvy startups for its future partnerships. Located in Israel’s second-largest city, Tel Aviv, Hyundai’s R&D base in the Middle East has played a significant role in its group-wide research drive.

Hyundai CRADLE Tel Aviv was established in 2018 and invested in a total of 17 companies there. The office is also expanding its partnerships with tech startups there each year. Hyundai Motor Group Executive Chair Chung Euisun has also been expanding investment in Israel after he visited the office of the country’s Mobileye in 2017. The company is best known for being the world’s first developer of the advanced driver-assistance system (ADAS).

A spokesman at Hyundai Motor declined to leave any comments regarding the issue, citing the sensitivity of the issue.

However, Hyundai is forecast to offset potential sales fall in Israel by expanding its presence in the United Arab Emirates (UAE) after Korea and the UAE recently signed a bilateral free trade agreement.