Hyundai Motor's 'Achilles' Heel' China Market: Will Luxury and Electrification Work?

[Asia Economy Reporter Yoo Je-hoon] Hyundai Motor Group is making a renewed push into the Chinese market by launching its premium brand Genesis. Attention is focused on whether this premium strategy can succeed in the Chinese market, which has long been a "sore spot" for Hyundai.

According to industry sources on the 11th, Hyundai launched the Genesis brand in China on the 2nd (local time) and opened the "Genesis Studio Shanghai" at Hong Kong Plaza in downtown Shanghai on the 8th (local time).

Studio Shanghai is Hyundai's first exhibition and sales center in China and the second Genesis Studio overseas after Sydney (Australia). It is a space where customers can directly experience and purchase premium sedans like the G80 and sport utility vehicles (SUV) such as the GV80.

Hyundai's focus on launching Genesis is due to the Chinese market's prolonged slump following the deployment of the Terminal High Altitude Area Defense (THAAD) system. In fact, Beijing Hyundai and Dongfeng Yueda Kia, Hyundai and Kia's local joint ventures, posted their worst performance last year due to COVID-19 and other factors. According to each company's public reports, their combined sales revenue dropped about 25% to approximately 10.4 trillion KRW, while operating losses more than doubled to about 1.8 trillion KRW.

Industry insiders cite not only the impact of THAAD but also Hyundai and Kia's position in China being "sandwiched" between imported brands and domestic brands as reasons for the poor performance. An industry official said, "As China's economy expands, demand for luxury cars is shifting to high-end foreign brands, while demand for mass-market cars is going to domestic brands, putting Hyundai and Kia in a sandwich position," adding, "Generally, it takes a considerable amount of time to improve an established brand image."

In response, Hyundai aims for a turnaround this year by breaking through with premiumization and electrification. The launch of the premium brand Genesis in the Chinese market is part of this strategy. Hyundai Motor President Ha Un-tae stated at the regular shareholders' meeting in March, "We will actively improve areas that have been sluggish, such as China and commercial vehicles, and make this year the first year of business turnaround," and added, "We will expand sales centered on new models and focus on enhancing brand power to restore our position in the Chinese market."

Electrification is also a key strategy. Hyundai and Kia plan to launch the locally tailored Mistra EV this year, along with introducing their dedicated electric vehicle models, the Ioniq 5 and EV6.