Hyundai goes for (sustainable) growth
A top five manufacturer within the next 10 years, double European sales within the next couple - haven't we heard all this before from the South Koreans? During the early 1990s all the Korean manufacturers had ambitious plans for world domination until the Asian economic bubble burst. Overstretched at the banks as they globalised, Daewoo, Ssangyong, Kia and Samsung were almost wiped off the face of the planet while Hyundai clung on by its fingertips. Chris Wright reports.
Hyundai is the only one to retain its independence today (although Ssangyong is making an unlikely comeback) and has even successfully merged Kia Motor into its operations. Now the manufacturer is making those grand claims once more, with new factories in North America and China and searching for a site a European plant - so what's different this time?
Hyundai's European chief Werner Frey says the company is now much better prepared and has learned some harsh lessons. "We realise that globalisation goes with localisation and the fact that you have to build your sales base first before you start considering new factories around the world," he said.
"We are also better placed in terms of product although in Europe we certainly need to have a more distinctive model in the C segment which is a very competitive area. The Getz is performing very well and niche models such as the Coupe, Santa Fe and Terracan will be important to us. We will have more SUV product in the near future." This will include a further SUV based on the Elantra platform which will be launched at the Detroit auto show next year. The new Sonata will be unveiled at the Geneva show two months later.
Hyundai is likely to make a decision on a European manufacturing plant within the next six months. Frey said the company was closing in on the volumes required to make a plant viable. A European manufacturing operation, he said, was a vital component in the Korean company's vision to be a top five automaker by 2010. European sales are currently running at 250,000 a year, a figure Frey expects to double within the next five years. HMC is currently the third largest importer into Europe from the Far East behind Toyota and Nissan - and closing fast on second place. A new plant would build B and/or C sector models and most probably Hyundai and Kia brand vehicles.
With volumes of the Hyundai Getz building rapidly, this is likely to be the first car to go into production. Frey added: "In my opinion I would think we would produce both brands, two thirds Hyundai and one third Kia."
"A number of locations for the new plant have been speculated upon including Hungary, Poland, Czech Republic or Slovakia."
Hyundai and Kia's share of the western European market rose to 3.2 percent in the first half of this year, up from 2.7 percent in the same period in 2002. In June alone sales of Korean cars were up 28.3 percent with Kia becoming the fastest growing brand in the region. Its sales rocketed 53.8 percent in the first six months of 2003 reaching 82,000 units.
Jean-Charles Lievens, vice president Kia Motors Europe, is targeting sales of 125,000 units this year and 300,000 in 2005. To help achieve higher European sales both Frey and Lievens are looking to increase dealer numbers across the region by between 300 and 400 each in the next two to three years. "Changes to Block Exemption rules have proved to be an opportunity for us," Frey added. "While other brands have been rationalizing their network we are looking to increase and there are a good many dealers who we are interested in working with.
"There is some work we need to do on the existing network, there are too many open points in major cities and metropolitan areas while in Germany there are far too many very small dealers and that is something we have to change."
Closing current open points, he believes, can increase volume by between 10 and 15 percent while increasing the network, currently at 2,300 across Europe, would add a similar percentage. "We also need to work a little harder on the quality of service our dealers offer, particularly as the market opens up more to independents with the changes to Block Exemption rules," said Frey.
Frey added that that HME was still watching the experiment being run by Hyundai Car UK which offers a five-year warranty on all models sold there. "I am clearly interested in the effect this has on residual values and we are also looking at what other manufacturers are doing - Toyota is currently running a similar offer in France."
Not quite so clear-cut is the future of Hyundai's involvement in World Championship Rallying. The team, run by Motor Sport Developments (MSD) in the UK has been put under increasing financial pressure by HMC in Korea and has already had to reduce the three-car team to two cars this season. Budgets have been squeezed to the point that the team has been unable to carry out the amount of testing it would like or achieve the standards reached last season. A meeting of the HMC board to discuss the future of the team is understood to be imminent and the motion on the table is either to return to full-bore financial support or pull out together.
Vice-President Hyundai Motor Europe, Werner Frey, said: "My belief is that if you are going to compete in a formula such as WRC then you have to do it properly and that means putting the necessary funds behind it - if not it is not worth doing." A top WRC team needs to be funded to the tune of around €75 million a year. MSD's budget is understood to have been slashed to just €15 million this year.
Sources at HMC in Seoul said that there was a definite split. A lot of advice going to the board was to fund the team properly, but elder members of that board, including chairman Chung Mong-Koo understood less the need for such vast financial sums being sunk into motorsport.