Is Hyundai becoming a ‘more sophisticated’ car brand that has moved on from its value driven image in Europe? Hyundai Motor Europe President Kun-Hee Ahn tells Dave Leggett that the brand is heading upscale on the back of new products that are raising its image. It’s also growing fast in Russia and installing plenty of production capacity in Europe.
Hyundai Motor has quietly expanded its presence in Europe to a level that may surprise some. And it has already launched an ‘affordable luxury’ brand in the US and Korea selling the Genesis sedan (the aggressively priced Genesis Coupe has just launched in Korea with sales in the US planned to commence next year).
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It sounds like a strategy straight out of the Toyota manual for long-term volume, share and profitability growth. Slowly does it. Anyone who remembers the mess Hyundai got itself into in the 1980s – especially in North America – when it tried for too much, way too soon (let down by poor quality), will perhaps appreciate why there is a naturally cautious approach to overseas sales and has been for some years. The approach is to develop basically robust models, enter the market with relatively cheap imports for a foothold, gradually extend the range to higher margin products and then eventually move on to local assembly operations alongside models developed in regional design centres.
By then you could even be confusing Hyundai for Toyota, Nissan or Honda, its global corporate star shining brightly, taking cultural elements of home to a wider world. The Hyundai Way? It’s perhaps a nice thought, but there again I don’t recall Toyota workers in Japan striking over US beef imports as part of the annual wage negotiations. Korea ain’t quite a Japan-in-progress. (A slight aside – let’s file chairman Chung Mong-koo’s activities under ‘Korean corporate culture’ rather than anything Hyundai-specific.)
While there are no plans to launch Genesis in Western Europe anytime soon, the sedan was on display to European journalists and consumers at the Paris Auto Show, along with a jazzed up concept version of the Genesis Coupe. But if that’s not a statement of eventual intent, I don’t know what is.
I recently met Hyundai Motor Europe’s President, Kun-Hee Ahn, in Paris and he smiled broadly when, at one point, I made reference to the performance of group partner Kia. That was not for him to pass comment on. While Kia is a wholly owned subsidiary of Hyundai Motor, the reporting structures mean that he doesn’t talk about Kia.
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By GlobalDataThe two brands have separate organisational pyramids going into the HM board in Seoul. Hyundai’s European head looks after sales and production in Europe, Kia’s does likewise. Though they may cooperate at some level, they’re pretty independent, the sales organisations completely separate. Think of it as like Peugeot and Citroen.
Like most automaker execs right now, Mr Ahn is concerned about the uncertainties in the market – in his case, Europe.
“The fourth quarter of this year will be critical,” he says. “We’ll see whether the market is dropping further and also we’ll have an idea of whether we’ll see a recovery next year, or not.”
Despite the market uncertainties, Ahn is optimistic about Hyundai’s prospects.
While Kia has been something of a growth engine for the group in Europe this decade, Hyundai has been no slouch either. ACEA figures show that Kia’s annual European sales soared from just 75,800 units in 2001 to 259,300 in 2007. But Hyundai also grew from 247,000 to 315,800 units.
This year the company expects to sell 350,000 vehicles in Europe. If Russia (210,000 sales planned for this year, helped by a thriving local assembly operation) and other countries from Eastern Europe are added in, the total Hyundai figure is inflated to an eye-popping 600,000 units.
New models – especially the new breed of small cars like the i10, i20 and the i30 – will help to underpin volume growth in Europe – growth mainly in the east, share to be protected in the highly competitive and more problematic demand conditions in the west.
The i20 that debuted in Paris is bigger than the Getz it replaces and was also designed at the firm’s European headquarters in Russelsheim. It’s aimed squarely at European tastes, and it will be very competitively priced.
Local assembly will also help Hyundai to further build European volume. A big assembly plant is about to become operational inside the EU.
“We are now building a plant in Czech Republic which was supposed to start production in March 2009, but we are bringing that forward to November 1 this year, when it will start producing the i30 passenger car,” says Ahn.
That plant will have annual production capacity of 300,000 units. Is that enough?
“For the time being. We also have the Kia plant in Slovakia, which has 300,000-unit capacity as well. And we can adjust model-mix at either plant to make cars for the other brand.”
Bu what about that pile ’em high, sell ‘em cheap Hyundai brand? Where does Kun-Hee see the core brand values heading?
“So far the Hyundai brand represents value for money and some people still see Hyundai as a cheap brand, but we are now a top tier European manufacturer. In Russia we are the number one importer. We understand still that in Western Europe we have to improve and upgrade our brand image. That is still a major task for us but the new models we are bringing out help.”
Is that goal of improved image also achieved by marketing activity?
“Yes, marketing and also upgrading our sales platform and brand education through the whole organisation, including our dealer partners so that the customer perceives Hyundai as tier 1.”
And what about Genesis for Europe? Ahn sees other priorities and suggests that the West European market would be a difficult one for a new luxury brand. Hyundai has perhaps studied the Lexus experience in Europe.
“We developed that for the North American and domestic market and some Asian countries, and also Russia. But in Western Europe we would be competing against BMW, Mercedes and Lexus.
“We have had a very good reception for Genesis in North America, but we are taking our time right now.
“The Genesis sedan is being shown in Paris because we want to see the reaction of European journalists and the public, but it will take time…”
Dave Leggett
See also: UK: Hyundai now ‘more sophisticated’
PARIS SHOW: Hyundai i20 targets big rivals
