Staff Reporters
Oct 19, 2015

Hyundai flounders due to sedan reliance

BRAND HEALTH CHECK: The Korean carmaker is putting the brakes on production as sales, profits tumble

Speed bump: Poor sales trigger production cuts
Speed bump: Poor sales trigger production cuts

Hyundai’s domestic troubles and currency woes have forced the carmaker to cut output at its plant in South Korea by 25 per cent, while affiliate Kia scaled back working hours at its China unit.

The two companies suffered on the back of their heavy reliance on sedans in times of a global boom in the SUV market.

The weaker yen has also helped to prop up Japanese rivals such as Toyota.

Hyundai Motor and sister company Kia saw annual sales drop 6 per cent and 5 per cent, respectively. In August, the firm reported a 27 per cent decline in sales in China. In the US, its sales dropped 10 per cent in May, the sharpest decline in five years.

In response, Hyundai is strengthening its sales and marketing team with the addition of dealers and investment in new marketing platforms and digital showrooms. 

Jonathan Cummings
Managing director
Start JG Hong Kong

I’ve always found Hyundai somewhat of an enigma.

The world’s fifth largest carmaker is ranked comfortably inside Interbrand’s top 100 suggesting brand strength. However, for me there’s a lack of anything truly compelling about their delivery and story. There are undoubtedly economic factors driving the reported fall in sales. There may also be product range issues, with a weaker SUV lineup than would be ideal for some key markets.

But there is a larger threat — the lack of a clear brand purpose. As ‘brand-builders’ they have clearly done a great job: worldwide distribution, large-scale sponsorship and marketing activity, plus a decent amount of product localisation has driven high growth to date. But what lies beneath the surface is pretty thin.

Hyundai is lacking any real impression. Every major competitor — be it Ford, Honda, BMW, Mercedes, VW, Renault, Toyota, Citroen, Peugeot, Subaru, Fiat, or even BYD from China — conjures up multiple images of positive brand association.

But for Hyundai I struggle. ‘New thinking, new possibilities’ is the brand platform. But what tangible evidence is there of delivery against this? Something bold, strategic and long-term would work well to underpin the brand.

Kihong Kim
Associate director, automotive division head
GfK Korea

Imported cars account for over 15 per cent of sales in Korean automotive market, more than double the market share compared to five years ago. While the sales of imported cars in Korean market is steadily growing, especially in the premium segment, domestic makers continue to struggle.

This is because as the sales of Korean car companies grew significantly in overseas markets in the past 10 years, they neglected domestic consumers, and were unable to respond to changes in the domestic market.

Moreover, a perceived lack of communication with domestic consumers contributed to anti-Korean sentiment. For a long time, local carmakers focused mainly on the mid-and large-size segment that generates high profit margins. Consumers started to lose patience with domestic makers, which led to an increase in sales of imported premium brands. At the same time, as the sales of compact car/small size car of Korean makers has decreased, they are struggling to defend their domestic position.

To regain its position in the domestic market, Korean firms need to restore faith through strengthening customer service and by identifying consumers’ product needs. They need to consider launching new products suited for the domestic market.


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