[Hyundai Way Secret②] 'Imported Car Graveyard' China Dependence↓... Hyundai's Masterstroke

Hyundai Motor and Kia's China Sales Share Drops to 4% in H1
Gradually Declined from 21% Before THAAD Incident
Shift Focus to US and EU Advanced Markets
Imported Car Market Share in China Falls to 33% in July
Volkswagen and GM with High China Exposure Struggle with Profitability

Hyundai Motor Group's early move to reduce dependence on China and increase its share in the US and Europe has proven to be a 'masterstroke' in the current market situation. While foreign automakers are struggling as Chinese brands' market share in the Chinese automotive market recently approaches 70%, Hyundai Motor Group quickly shifted its focus to advanced markets after experiencing a sharp decline in sales in China following the THAAD incident in 2017.

According to Hyundai Motor and Kia's performance data on the 4th, out of approximately 3.49 million global retail sales in the first half of this year, Hyundai and Kia's share in China was only 4% (134,000 units). During the same period, the share of China in sales by brand was 30% for Volkswagen Group and 16% for Toyota Group.

Before the fallout from the THAAD (Terminal High Altitude Area Defense) incident, Hyundai and Kia's sales share in China reached 21% (793,000 units in the first half of 2016). Over eight years, Hyundai Motor Group significantly reduced its dependence on Chinese sales from 21% to around 4%.

Hyundai Motor Group also restructured its assets in line with changing regional sales volumes. They believed that capital investment was excessive relative to sales volume in China. They judged that cutting off the painful part was necessary to maintain overall profitability in the global business. Hyundai Motor reduced its local factories from five, which it had once expanded to, down to three. One factory is planned to be sold additionally.

The gap left in the Chinese market was filled by focusing on advanced countries such as the US and Europe, along with emerging markets like India and Latin America. In particular, during the same period, the share of North American sales increased from 18% to 26%, Europe from 13% to 17%, and India's share roughly doubled from 6% to 12%. As sales increased centered on the US and Europe, export unit prices rose. Overseas sales also increased mainly in high-margin eco-friendly vehicles and sport utility vehicles (SUVs), improving profitability.

On the other hand, most global manufacturers highly dependent on China are taking a direct hit from the rapid rise of Chinese local brand electric vehicles. As of July this year, the share of imported cars in the Chinese automotive market fell to 33%. The market share of imported cars in China had risen to 56% in 2022 but plummeted within about two years due to the strong performance of local brands. Volkswagen Group, which had consistently held the number one market share in China, lost the top spot to BYD for the first time last year.

Volkswagen Group's share of profit and loss from its Chinese joint ventures in the first half of this year (810 million euros) decreased by about 30% compared to the previous year. GM, which once sold 4 million units annually in China, posted a net loss of $140 million (approximately 140 billion KRW) in its China business in the second quarter of this year. Both companies recently hinted at strong restructuring.

The industry views the poor performance in the Chinese market as one of the biggest reasons for the restructuring. GM Chairman Mary Barra mentioned to investors in July, "There are hardly any competitors currently making money in China."