Hyundai Motor's Santa Fe SUV and affiliate Kia Motors' K9 large sedan are selling like hot cakes. Orders for the Santa Fe have already reached 20,000 units since it was released last Wednesday, so customers have to wait three months to get their hands on one of the cars. For the K9, which hit the market on May 7, the wait is about two months.
Hyundai-Kia Automotive Group achieved its highest profits, highest sales and highest operating margin last year. Even in the first quarter of this year, a typically slow season for car sales, Hyundai Motor posted W2.45 trillion (US$1=W1,164) in net profit and an operating profit margin of 11.3 percent, topping even German luxury carmaker BMW. The group grabbed a 6.1 percent share of the European market last month amid shrinking demand for cars there, surpassing the 6-percent level for the first time on a monthly basis. Some are saying that the auto group is now invincible.
But if Hyundai, the world's fifth-largest carmaker, is to continue its stellar performance, it needs to overcome at least three hurdles. The first is to deal with a comeback of Japanese automakers. Japan's Big Three carmakers Toyota, Nissan and Honda, which were impacted heavily by the massive earthquake last year and the strong yen, posted almost five-fold on-year increases in operating profit in the first three months of this year. They also released cars priced between W6 million to W10 million (US$1=W1,164) targeting key emerging markets like India and China. The move was tantamount to a declaration of war against Hyundai Motor.
Japanese carmakers are faring much better now in terms of funding, while their vehicles have become more price competitive due to the weaker yen. Toyota regained its status as the world's largest carmaker in the first quarter of this year after posting record earnings, while Nissan achieved its best net profit in five years.
The second hurdle is clinching a firm lead in the Chinese market. Volkswagen, which controls the largest share of the world's biggest car market, plans to roll out vehicles beginning next year at its new plants in Changchun in northeastern China, Shanghai, Foshan in the south and also in the Xinjiang Uyghur region in the west. BMW has introduced a lengthened version of its new 3 Series for the Chinese market, while Lamborghini has unveiled an SUV called the Urus targeting China. They are all aimed at overtaking Hyundai, which controls the third-largest share of the Chinese market. Toyota is also rushing to build an R&D center in Jiangsu Province to develop a hybrid car for the Chinese market.
The third hurdle for Hyundai is to bolster its auto electronics technology, which lags behind its rivals, and to develop its own electric vehicle. While Hyundai has yet to roll out a truly successful EV, U.S. and German automakers as well as Japanese carmakers are already competing to make their recharging methods for EVs the industry standard. It also needs to transform its production methods from simple shared platforms to a modular method where parts are developed like Lego blocks and used in varying degrees according to vehicle.
In 2007, Toyota posted an operating profit of 2 trillion yen (around W28 trillion) and was believed to be invincible. But it ended up shifting into the red just two years later. There is no room for bad judgments in the competitive global car market. Hyundai needs to stay alert rather than bask in its glory.
By Song Eui-dal from the Chosun Ilbo's News Desk