[Global Big 3 Hyundai Motor] "Jumping in Crisis" Precision Supply Chain Management and Electric Vehicle Leadership Paid Off

Minimizing Production Disruptions Amid COVID-19 and War Impact
Internalizing Supply Chain Management Capabilities
"No Blame on Crisis," Leveraging as Opportunity
Revising Electrification Strategy Including Dedicated Electric Vehicles

[Asia Economy Reporter Choi Dae-yeol] Hyundai Motor Group's rise to become one of the 'Big 3' automakers was largely influenced by meticulous supply chain management. The disruption in vehicle semiconductor supply caused by COVID-19 has continued for over two years, and the global production and logistics shocks following Russia's invasion of Ukraine in March this year have inevitably shaken the entire automotive industry. It is interpreted as a leap forward by taking advantage of the upheaval brought by the global automotive industry's transition to electric vehicles. Securing the market amid this period of drastic change in the global automotive industry's shift to electric vehicles is also cited as a background for this progress.

Holding Firm While Competitors Staggered by COVID-19 Lockdowns and War

Hyundai Motor and Kia's sales in the first half of this year decreased compared to the same period last year. However, the decline was less than that of global competitors. Hyundai Motor and Kia's sales drop was around 5%, compared to Toyota (6%), Volkswagen (14%), Stellantis (16%), Renault-Nissan-Mitsubishi (17%), and General Motors (GM, 19%), showing a relatively strong performance. This was the result of internalizing supply chain management capabilities and working organically with numerous parts suppliers and partners. Hyundai Motor Group was praised for its quick response, such as redirecting vehicle semiconductors originally allocated to its Russian plant to other overseas plants to minimize production disruptions.

The dedicated electric vehicle Ioniq 6, unveiled for the first time at last month's Busan International Motor Show

The reduction in sales share in China following the deployment of the Terminal High Altitude Area Defense (THAAD) system paradoxically became an advantage. China is considered the world's largest automotive market. Global makers cannot ignore it, but GM and Toyota, which have a high sales share in China, were more severely impacted by logistics and factory shutdowns due to the local authorities' zero-COVID policy. Hyundai Motor and Kia also faced delays in parts supply from Chinese partners, but production disruptions were relatively minor.

Makers with a large business share in Russia or concentrated production facilities in Eastern Europe were heavily affected by the war. Renault, based in Europe, owns AvtoVAZ, Russia's largest automaker, as a subsidiary, and the multinational alliance Stellantis also has many production facilities in Europe. Logistics and transportation disruptions caused by the war halt entire automotive production lines. Recently, automotive production processes have been tightly managed with minimal inventory to maintain supply chain control.

Hyundai Motor Ulsan Plant Ioniq 5 Production Line [Image source: Yonhap News]

"Turning Crisis into Opportunity" Aggressive Business Plans During Automotive Transition Proved Effective

Hyundai Motor Group openly emphasizes the principle of 'not blaming the crisis' company-wide. Instead, it leveraged internal and external crises as opportunities. Rising to the global 5th place in 2010 was largely due to aggressive marketing during the global financial crisis centered in the U.S. from 2008 to the following year. Early establishment in China in the early 2000s also earned good marks by maintaining local operations despite the outbreak of Severe Acute Respiratory Syndrome (SARS) at the time.

The rapid establishment of dedicated electric vehicles like the Ioniq 5 and EV6, which have been recognized for their product competitiveness in major markets such as the U.S. and Europe, also played a role. Until a few years ago, Hyundai Motor Group simultaneously developed hybrid vehicles based on internal combustion engines, fuel cells powered by hydrogen, and electric vehicles.

Then, anticipating the market would rapidly grow centered on pure electric vehicles, they revised their eco-friendly vehicle strategy. Dedicated models that consider electric vehicle-specific features such as driving range and charging convenience have become essential for all automakers, including Hyundai Motor Group. Excluding Chinese companies that grew based strictly on domestic demand, Hyundai Motor and Kia ranked third in electric vehicle sales in the first half of this year, following Tesla and Volkswagen. They also hold top positions in electric vehicle market share in Europe, where local brand preference is high, and rank second after Tesla in the fiercely competitive U.S. market.

Jung Eui-sun, Chairman of Hyundai Motor Group, has consistently emphasized that "in the electric vehicle era, you must be a first mover." While Hyundai was late compared to U.S., European, and Japanese makers who started internal combustion engines decades ago and had to catch up, the completely changed rules in the electrification system now allow competing from a leading position.