Europe, Asia Stimulate Hyundai Expansion

As far as Hyundai Motor Co. is concerned, if North America and China are important for the market they currently offer, then Europe and other parts of Asia are valuable for their potential.

Exports to Europe are soaring at such a rate that it is likely to come out as the second-largest auto export market this year after the United States. Prospects are only brighter when considering the European Union is due to expand significantly next year.

Asia, including China, on the other hand, holds an even bigger promise of eventually becoming the No. 1 market, albeit this may take some time, with collective demand forecast to rise to over 1 million vehicles per year.

Hyundai Motor, Korea's top and the world's eighth-largest auto manufacturer, is not sitting by idly watching these changes. It has launched aggressive efforts to establish its position in these key regions, among them building research and development centers, expanding production facilities and launching marketing drives.

Speeding in Europe

Having shipped its first batch of cars, made up of Elantras, to Europe in 1990, Hyundai Motor has seen rapid growth in the market, selling 350,000 units through last year. During the first eight months of this year, the company moved 197,513 units, up 13.4 percent from the same period of the previous year, and it expects the figure to total 303,000 units by the end of December.

"Europe is forecast to emerge as a major car export market for Korea, possibly as profitable as the United States. We plan to further boost our market share by increasing investment, rolling out slick new models, beefing up sales networks and bolstering marketing activities to improve brand awareness," a company official said.

Hyundai is already active in investing. The company spent 60 billion won to build a world-class research and development center in Germany this year, thus adding to its collection in Korea, North America and Japan.

Hyundai Motor plans to utilize the new R&D center as an outpost to make aggressive inroads to the European market, part of its larger plan to become one of the top-five global automakers by 2008.

"The new center will pay a central role in designing cars for European tastes and will be essential in achieving our goal of being among the top-five carmakers in the world," said Hyundai Motor CEO Chung Mong-koo at the center's opening ceremony in Frankfurt on Sept. 8.

Hyundai has long believed that one of the key strategies to success is operating R&D centers worldwide in order to design and manufacture localized cars for their target markets. Accordingly, the company always employs local staff, with them making up a significant portion of the 100 car designers and engineers at the European center.

Further illustrating the company's intention to invest in its future, Hyundai announced in January that it would boost its 2003 R&D spending to 2.25 trillion won ($1.92 billion), 50 percent more than the previous year, in order to introduce four or five new models each year. Hyundai hopes to match the quality levels at Toyota, a major Japanese automaker, by 2005.

Making European cars

Now that the brain is in place, Hyundai Motor wants to produce as well. It is currently pursuing building its first factory in Eastern Europe, with four possible sites in the Czech Republic, Hungary, Poland and Slovakia.

Top executives of the firm recently visited the areas to speed up efforts to select a destination. They will finalize the plant location based on working-level officials` market research and feasibility studies, and also on the investment incentives being offered.

Hyundai said it would push to select the plant site by mid-2004 at the latest, with construction set to begin by the end of the year. The European plant is scheduled to produce 300,000 units of three passenger car models annually.

"Countries in Eastern Europe are the best candidate sites for the new plant in consideration of wage levels, brand awareness and other economic factors. The Czech Republic has emerged as the strongest candidate," a company official explained.

The Czech Republic's Ostraba region, for instance, is already home to a number of world-class auto parts manufacturers, offering significant advantages in terms of access to locally produced components, as well as a highly skilled labor force, he said.

"In addition to its Central-European location enabling easy access to Western European export markets, the Czech Republic also has a talented pool of skilled technical and engineering professionals."

Selling spree

The company has also been concentrating on its European sales drive. It has held a number of special marketing projects this year, including an Elantra Test Drive event in July where 200 auto experts from 20 European countries were given the chance to get behind the wheel.

Hyundai has also been active at auto shows in Europe, showing off 11 vehicles at the Moscow International Motor Show 2003 in August. The pack comprised seven passenger cars - the Equus, Avante XD, Tuscani, Verna, Click, Santa Fe and its concept car OLV - and four commercial vehicles - a minibus, an express bus, a refrigerator van and a mixer truck.

The carmaker expects its participation in the motor show to boost its brand-name recognition and sales in Eastern Europe. Hyundai sold 6,800 vehicles in Russia in the first seven months of this year, up 315 percent from the same period last year, while increasing its Eastern European sales by 100 percent to about 19,700 units.

The company also participated in the 60th Frankfurt Internationale Automobil Ausstellung Motor Show, one of the world`s four major auto exhibitions, last month.

Hyundai presented the Hyundai CCS, a concept hard-top convertible based on its Tuscani sport coupe, the New Avante XD compact vehicle, which is sold under the name of Lantra in Europe, and a diesel-powered Click subcompact model, called Getz in overseas markets. Hyundai is the first Korean carmaker to develop a convertible.

Meanwhile, a biweekly magazine, Automotive News, reported last month that Hyundai`s cars ranked No. 1 in a customer satisfaction survey of new-vehicle purchasers that was conducted by auto manufacturers last year.

Asian dream

Asia is considered important for more reasons than just its size, as it is also simply good strategy to export to markets like Southwest and South Asia.

This has already been proven by Hyundai's 100-percent-owned subsidiary, Hyundai Motor India, established in 1998 in Chennai, a major city in the southern part of India. The Indian affiliate sold 110,000 cars last year, of which 8,500 vehicles were exported from India to Algeria, Morocco, Nepal, Sri Lanka, Indonesia and Columbia.

HMI is currently India's second-largest auto company and the fastest growing in the industry, having sold more than 350,000 cars since 1998.

To expand its opportunities, Hyundai Motor decided in August to build a second Indian factory by 2006. "Given its current growth rate, India will have no problem contributing significantly to the parent company's goal of becoming a global top-five automaker by 2008," a Hyundai official said.

Market potential is aplenty in India alone, though, as about 25 million of the country's 1 billion population are said to be economically upper class, thus possessing significant purchasing power. In addition, there is a new trend in which salaried workers are buying vehicles.

Accordingly, the market that totaled just 55,000 units annually in 1999 is expected to reach 1.2 million units by 2005.

Hyundai first entered the market with the Santro model in September 1998, and then introduced the Accent in October 1999 and the Sonata in July 2001. All of these now boast the top market share in their respective segments, with the Santro controlling 27 percent, the Accent 20.4 percent and the Sonata 50.4 percent.

The secret to such success is said to have been Hyundai's skillful localization.

For example, knowing full well that previously consumers in India had only been exposed to old-fashioned car models, the Korean carmaker entered the market with 1-liter-engine small cars that were modern in design and European in quality.

Today, the Indian branch is also recognized as a model corporation for the way it has cultivated peaceful labor relations through regular communication with the employees and their families. One of its famous programs is the "My Machine" project in which a manager and a factory worker are paired up and assigned to be in charge of one machine. This broke down the barrier between the office and the production facility.

The company is also appreciated for its technology transfers to local companies and for its dutiful paying of taxes, which helped develop both the national and local economy.

Growing project

In addition to China and India, Hyundai Motor is also expanding its network in other parts of Asia, like Malaysia and Australia.

Earlier this year the company began production of the Atoz model in Malaysia and expects that beginning in 2005, it will sell 60,000 units in Malaysia, 40,000 units in Indonesia and 20,000 units to other markets in the region.

In September, Hyundai announced that it would set up an auto sales unit in Sydney to enhance its brand-name recognition in Australia and implement localized marketing strategies that will lure customers back into the showrooms.

Hyundai's exports to Australia, most of which have been the Accent and Verna compact sedans, have been dropping. Sales peaked at 59,798 units in 1997, and then slid to 34,176 vehicles last year due to an economic slump. Vehicles sales during the first eight months of this year declined to 20,268 units. Hyundai entered the market in 1987.

"By establishing a sales unit, we hope to recover a lost market," a Hyundai official said. "For the short term, we plan to focus on increasing sales to the level of 1997."

This is the third of a five-part series about how Hyundai Motor Group went global as part of their efforts to become one of the top-five automakers in the world. - Ed.