Hyundai Motor Group has suffered a rapid drop in car sales in China so far this year, although the market has been the most lucrative revenue source for the second-largest South Korean conglomerate.
Hyundai Motor posted 229,011 units in Chinese sales during the first quarter, down 18.2 percent over the same period last year. Its sister firm Kia Motors reported a 10.4 percent decline by selling 138,292 units.
Amid the slump, a report from a global consulting firm is frustrating Hyundai-Kia, which is ranked third with a market share of 7 to 8 percent there, following Volkswagen and General Motors. While the Korean duo captured more than 10 percent of the market last year, the gap between the duo and Japanese competitors has continued to narrow.
A recent poll by U.S.-based McKinsey & Company on 3,500 Chinese consumers showed that 43 percent of those who owned a Korean brand car want to switch to a more upscale brand. That was the highest percentage following those owning French cars. McKinsey said that those with German cars were the most loyal to the brands they owned.
This means that Chinese consumers are less loyal to Hyundai cars than most other auto brands. And market insiders say the latest report may put another strain on Hyundai Motor which is already seeing declining sales in China between high-end foreign brands and low-cost local brands.
Aside from the first quarter of this year, Hyundai and Kia’s Chinese market car sales fell by 5.1 percent and 4.5 percent in 2015, respectively, from a year earlier.
Considering that the Korean group is one of the few global carmakers that vigorously invested in China with the establishment of assembly lines there for more than a decade, it is urgent for it to find a breakthrough.
If it is beyond the group’s ability to catch up with German companies or others in premium segments, it needs to grab the opportunity to develop futuristic cars in contemplation of China’s policymakers’ vision, which was unveiled in 2012.
Under their initiative to improve the environment and raise technologies held by Chinese manufacturers, China is aiming to increase the annual sales of electric vehicles to 5 million units by 2020.
The worldwide popularity of U.S.-based Tesla Motors’ vehicles shows that Korean companies are already lagging behind in EV development. The Tesla Model 3 can run up to 346 kilometers on a single charge, while Hyundai Motor’s Ioniq EV, which will go into the mass market later this year, has a 180-kilometer range.
However, it is not too late for Hyundai-Kia. While the collective car sales of global brands reached 21.1 million units in China in 2015, the ratio of EVs stood at only 1 percent. It is just the beginning.
Hyundai Motor vice chairman Chung Eui-sun is visiting China to look into global trends at the Beijing International Automotive Exhibition, which runs through Wednesday.
The conglomerate’s heir apparent has to suggest mid- and long-term blueprints to overcome the sales crisis as soon as possible. Just as Hyundai Motor’s sagging stock price indicates, investors appear to be skeptical about Hyundai-Kia’s competitiveness on the global stage as well as in China.
