Despite Strong Performance in Global Markets... Hyundai Motor and Kia Struggle in China

Between Overseas and Local Brands, 'Sandwich'... Will Electrification and Premiumization Break Through?

[Asia Economy Reporter Yu Je-hoon] Despite Hyundai Motor Group's strong performance in the global automobile market, it has been struggling specifically in the Chinese market. This is due to intensified competition with local and foreign brands. Hyundai Motor and Kia plan to re-enter the Chinese market through accelerated electrification and premiumization efforts that began last year.

According to Hyundai Motor Group on the 18th, Beijing Hyundai and Dongfeng Yueda Kia recorded sales of 501,980 units in the Chinese market last year. This is only a quarter of the approximately 1.79 million units sold in 2016, before the deployment of the Terminal High Altitude Area Defense (THAAD) system on the Korean Peninsula, and represents a 26.5% decrease compared to 2020, when production and sales sharply declined due to the COVID-19 pandemic.

This poor performance in China stands in stark contrast to Hyundai Motor and Kia's results in the neighboring Indian market. Last year, Hyundai Motor and Kia's India subsidiaries sold about 732,800 units domestically, establishing India as one of the four major markets alongside Korea, the United States, and Europe.

Since the Chinese market has been shrinking continuously after the 2016 THAAD incident, Hyundai Motor replaced its management last year and presented four major local strategies: strengthening localized research and development (R&D), expanding electrified product lineups, actively commercializing hydrogen fuel cell technology and expanding the hydrogen industry ecosystem, and renewing brand image. Accordingly, they added electrified models and launched Genesis locally, but visible results have yet to appear.

The reason Hyundai Motor and Kia continue to struggle in the Chinese market is primarily attributed to the lingering effects of the 2016 THAAD incident, but there is also an assessment that they are losing their position between local and foreign brands. Local brands, heavily equipped with electrification, have an advantage in cost-effectiveness (price-to-performance ratio), while competitors such as Volkswagen and Toyota have established their own positions through widespread popularity and high reliability.

In particular, the growth of local brands is becoming a threat to Hyundai Motor and Kia beyond the Chinese market. According to China's Ministry of Industry and Information Technology, last year’s exports of complete vehicles from China reached a record high of 2,015,000 units, a 99% increase from the previous year. Electric vehicle brands like Nio and Xiaopeng are expanding their sales channels not only in Hyundai Motor and Kia's main stage, the European market, but also in future markets such as Southeast Asia.

Hyundai Motor and Kia are expected to pursue recovery in the Chinese market this year through electrification and premiumization strategies. Leading with models like the Ioniq 5 and EV6, they plan to release new electric vehicle models annually, while also launching premium lineups such as the Genesis G90 to actively target the luxury car market. Hyundai Motor President Jang Jae-hoon recently told reporters, "Last year, we established brand bases in four regions including Shanghai and Chengdu, and now we are preparing to fully launch sales," adding, "Customer response is fundamentally important, and this year we need to make further progress."

An industry insider said, "The Chinese market is not only one of the world's top three automobile markets but also holds a significant share in eco-friendly vehicles such as electric cars, so it is difficult to give up," and added, "Since it is generally not easy for an automobile brand to break a fixed image, Hyundai Motor and Kia will need a lot of effort and time to recover the market."