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February 28, 2019

Hyundai lifts R&D spend by 60% to “lead global change”

Hyundai Motor Company announced plans to spend KRW45.3 trillion (US$40bn) in R&D over the next five years, as it looks to lead some of the "paradigm changes" the automotive industry faces in the next decade.

By bcusack

Hyundai Motor Company announced plans to spend KRW45.3 trillion (US$40bn) in R&D over the next five years, as it looks to lead some of the "paradigm changes" the automotive industry faces in the next decade.

At an investor meeting in Seoul, the president and chief executive officer Wonhee Lee said the company's mid- to long-term aim was to achieve an operating profit margin of 7% and a return on equity of 9% from its automotive business compared with 2.1% in 2018.

Lee told investors the investment plan demonstrated Hyundai Motor's "commitment to enhancing shareholder value, improving competitiveness and profitability and stabilising its financial structure to make it a stable and healthy company".

The KRW45.3 trillion spend includes KRW30.6 trillion for R&D and capital expenditure on vehicle manufacturing and KRW14.7 trillion on future growth areas such as autonomous driving technology, vehicle electrification and mobility services.

He added, through these investments, Hyundai would make "concerted efforts to spearhead the fourth industrial revolution by being a game changer in the automotive industry".

Average annual spending is projected to exceed KRW 9 trillion over the next five years, 58% higher than the KRW5.7 trillion average in the last five years.

Of the KRW30.6 trillion, KRW20.3 trillion would be spent on securing competitiveness in new vehicles and products while KRW10.3 trillion was earmarked for refurbishing outdated facilities and equipment.

The company said a significant part of the expenditure would be put into developing new platforms and powertrains, and new models embodying Hyundai's new 'Sensuous Sportiness' design philosophy. Investments would also be made to further strengthen Hyundai's SUV lineup, following the recent successful launches of the Kona compact SUV and the Palisade flagship mid size SUV. 

The number of Hyundai SUV models would double from four in 2017 to eight by 2020, including the launch of a new Genesis SUV this year. The strengthened SUV range is expected to help lift Hyundai Group sales and market share in the US after sharp declines in the last two years. 

From the KRW14.7 trillion budget for investment in growth areas, KRW6.4 trillion has been earmarked for smart mobility; KRW3.3 trillion for powertrain electrification; KRW2.5 trillion in autonomous driving and connectivity technologies; and KRW2.5 trillion for the development of artificial intelligence and other advanced R&D activities. 

Lee told investors "with the automotive industry facing sea changes, a significant portion of Hyundai's investment will be allocated to developing future technologies and solutions".

The company said it aspired to become a provider of "Clean" smart mobility and had partnered with southeast Asia's largest ride-hailing enterprise Grab, India's car-sharing company Revv and US-based mobility services provider Migo. 

The company said it was developing all types of electrified powertrain vehicles, from hybrid and plug-in hybrid to pure electric and fuel-cell electric models.

Earlier this year it announced plans to introduce 44 electrified powertrain models by 2025 with projected combined annual sales of 1.67m units, making it one of the world's top three manufacturers of electrified powertrain vehicles.

The automaker also planned to strengthen its leadership in the global hydrogen fuel-cell vehicle market, as it looks to progress from being the first automaker to successfully commercialise FCEVs in 2013. By 2030 it plans to have production capacity for 500,000 FCEVs per year and had earmarked an investment of KRW8 trillion. 

Hyundai also said it was making significant efforts in the development of autonomous and connected vehicles by continuously upgrading its advanced driver assistance system (ADAS) and autonomous driving technology.

It planned to trial an autonomous robot taxi programme in South Korea by 2021.

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