http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.49Change: 0.01
R/$ = 10.50Change: -0.01
Au 1294.90 $/ozChange: 0.00
Pt 1407.50 $/ozChange: -5.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Nelson Mandela 1918 - 2013   Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science & Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Feb 11, 2011

Fast-growing Korean car group believes it can sustain the pace

Back
Detroit|SEOUL|Ford|General Motors|Hyundai|Hyundai Automotive South Africa|Hyundai Motor Company|Hyundai Motor Corporation|Motors|Samsung|Toyota|Washington Post|Africa|Europe|North America|Algeria|China|Egypt|Germany|Libya|South Africa|South Korea|Turkey|United States|USD|Car Maker|Car Manufacturers|Motors|Passenger Car Market|Passenger Car Sales|Public Relations|Steel|Vehicle Manufacturers|Chung Mong-Koo|Frank Ahrens|Jay Y Lee|Lee Kun-hee|Lee Myung Bak|Motors|Steve Jobs|Steve Yang|Volkswagen|Hyundai Genesis|Samsung Galaxy Tablet|Sonata|Washington Post|The Soccer World Cup
detroit|seoul|ford|general-motors|hyundai|hyundai-automotive-south-africa|hyundai-motor-company|hyundai-motor-corporation|motors-company|samsung|toyota|washington-post|africa|europe|north-america|algeria|china|egypt|germany|libya|south-africa|south-korea|turkey|united-states|usd|car-maker|car-manufacturers|motors-industry-term|passenger-car-market|passenger-car-sales|public-relations|steel|vehicle-manufacturers|chung-mong-koo-person|frank-ahrens|jay-y-lee|lee-kun-hee|lee-myung-bak|motors-person|steve-jobs|steve-yang|volkswagen-person|hyundai-genesis|samsung-galaxy-tablet|sonata|washington-post-published-medium|the-soccer-world-cup
© Reuse this



It’s going to be difficult to stop Hyundai from becoming one of the top four vehicle manufacturers in the world, with the South Korean manufacturer and Detroit giant Ford currently jostling for the bottom spot of this exclusive club.

It has been a tough two to three years for the global automotive industry, with sales only last year showing signs of recovery after a bruising global recession.

Of the world’s top five manufacturers, the top two have been feeling the strain as Toyota continues to battle quality issues – or the perception thereof – and General Motors has had to run for cover as crippling debt forced it to file for protected bankruptcy. The US car maker has since recovered, but the cost of its funds and attention being diverted away from product development may only be seen at a later stage.

A reinvented Ford has become a profit- able business as it moves to smaller cars and a more focused business model, and German crown prince Volkswagen remains a top-selling badge, with its sights set on stealing the number one spot from Toyota.

This leaves Hyundai, which saw sales surge to 3,6-million vehicles in 2010, up from 1,6-million in 2000.

While some commentators regard this as stellar growth, even when referring somewhat nervously to the steepness of this curve, Hyundai Motor Company (HMC) president and CEO Steve Yang merely says: “Our speed is reasonable. We don’t think we are growing so fast”.

In South Africa, the Hyundai importer, Hyundai Automotive South Africa (HASA), wants to move from number three to the number one selling brand in the South African passenger car market.

In Africa, Hyundai is currently the number two selling brand in terms of new passenger car sales in 2010, with 80% of sales coming from four markets, namely Egypt, Libya, Algeria and South Africa.

In the US, where Hyundai has been present for 25 years, the brand saw sales of around 500 000 units last year, as the Korean manufacturer worked hard to polish its image. In Europe, however, Hyundai still suffers from poor public perception.

South Korea is Hyundai’s biggest market, followed by China and the US.

But why has the 44-year-old motor manu- facturer suddenly seen such an increase in sales? It has been exporting vehicles to the US since 1986 in the form of the Excel, but with limited success. What has changed in recent years?

The answer can be summarised best by HMC’s latest financial results, as the company posted a record quarterly profit in January, with a 48% increase in net profit to $1,26-billion, driven by what it said were new models and an improving brand image.

Changing Perceptions
When considering the company’s history, Hyundai global public relations team overseas business division director Frank Ahrens says that Hyundai’s initial focus was on volume, which resulted in the brand suffering “some quality problems”.

However, in 2000, Hyundai changed course and instituted a quality management initiative.

“We spent time building a quality brand, and now the challenge is to further elevate the brand.”

Ahrens marks certain important milestones in developing the company to its current stature.

For example, 1991 was a “liberation year” for the company as it pushed its first self- developed petrol engine onto the market.

From then on, things developed at a rapid pace as Hyundai opened its first overseas plant in Turkey.

However, the Asian crisis of the late 1990s saw the vast Hyundai empire collapsing, with HMC emerging in 2000.

In 2004, HMC developed its own diesel engine, followed by three new plants in China, in addition to a US plant and two Indian plants, besides others. Several research and development centres also opened their doors across the globe, including one in Germany.

Today, around 1,6-million Hyundai vehicles are made in South Korea, and 1,5-million are manufactured abroad.

Another highlight came in 2009, as the Hyundai Genesis was named Car of the Year in North America, which Ahrens, a former Washington Post journalist, says raised a few eyebrows.

In the end, he mulls, “it takes a long time to change perceptions”.

However, despite accolades such as the one bestowed on the Genesis, and growing sales, brand remains a sticky issue for the Korean manufacturer.

Even if Hyundai has become one of the top five car manufacturers in the world, its brand has not achieved the same success.

In 2010 the eighth-placed Hyundai brand was valued at $5-billion, compared with Toyota as the number one automotive brand at $26,2-billion, followed by Mercedes-Benz in second place, and BMW in third.

To achieve a brand breakout, the company has made available a healthy research and development (R&D) budget, with 4,7% of revenue going to this department in 2009, and 4,9% in 2008, coupled with some big spending on sporting sponsorships, such as the soccer World Cup.

Already, engineers at the sprawling Namyang R&D centre, outside Seoul, note that the drag value (wind resistance) of Hyundai vehicles has been cut by 30% on average for the last ten years, which has seen average fuel consumption drop by 15% at highway speeds.

Namyang covers 3,5-million square metres, and employs 10 000 people. When it was built in 1995, explains one Hyundai manager, it was running at around 50% capacity until five to ten years ago, when the company outgrew its newcomer boots.

Ahrens points to the importance of R&D in Hyundai’s future development.

“If you cut R&D, you have downstream problems for years, as can be seen in some US manufacturers. You need to crank out good solid product. If you have a year or so gap in product, you really lose ground.”

Product has been a big driver of Hyundai’s success in recent years. More than any- thing, it has been the combination of value-for-money, yet stylish, cars which has grabbed the attention of the motor- buying public.

However, will this, as well as rising sales, tempt the company to push up the price of its products? And, if it does, will buyers remain loyal, or seek an alternative?

But it seems value for money remains a pivotal aspect of the company’s new brand-management-orientated philosophy, as announced at the Detroit auto show at the beginning of this year, as it seeks to build “modern premium” cars, which it describes as “high-value products at an accessible price”.

Underneath all of this lies the “fluidic sculpture” design, churning out better- looking cars than the boxy-looking Hyundai vehicles seen as recently as the early 2000s.

Hyundai has also attempted to remain with the green development trend, and has also already developed the Sonata hybrid to go on sale this year, with a full electric vehicle based on the small i10 to go on sale at a yet undetermined date.

Innovator
By Hyundai executives’ own admission, the vehicle maker has been viewed largely as a “fast follower”, rather than a company which churns out its own original products.

“This is not so any longer,” says one executive. “The Veloster is unlike anything ever seen before.”

The Veloster, unveiled in January, is a three-passenger-door coupe boasting low fuel consumption, and it may find its way to South Africa by the end of the year.

It is not only Hyundai that has been described as a fast follower. Another Korean company, electronics giant Samsung, has also been under fire for being a copycat rather than an original product developer – a case in point being the development of the Samsung Galaxy tablet to follow where Steve Jobs’ iPad led.

Samsung has an interesting profile. Chairperson Lee Kun-hee is to be succeeded by his son, Jay Y Lee. Kun-hee reinstated himself as chairperson in March 2010, having stepped down after receiving a three-year suspended jail sentence for tax evasion and breach of trust in 2008.

The South Korean President later pardoned him, saying he was too important to the nation to be behind bars.

Samsung accounts for around 20% of the nation’s exports.

Hyundai Motor Corporation chair- person and CEO Chung Mong-Koo was in a similar position, as he was found guilty of fraud and embezzlement in 2007. However, he stayed out of jail as his three-year prison sentence was sus- pended, and until he was also pardoned by the same South Korean President, Lee Myung Bak.

It is clear that South Korea reveres its conglomerates and their leaders as national assets – another case in point being that the current President is the former CEO of Hyundai Engineering & Construction.

The South Korean public is also fiercely loyal when it comes to home-made products.

Between Hyundai and sister company Kia (Hyundai holds a 34% share), these manufacturers have an 80% share in the South Korean automotive market.

Trade deals currently in the pipeline may see opportunities for Hyundai to grow bigger internationally. However, there are also some who fear that these pacts may erode Hyundai and Kia’s king-sized market share at home.

South Korea and the US are in the process of finalising the text of a trade deal, with a signing ceremony expected in mid-February. Seoul and the European Union have also sealed a trade pact, which comes into force on July 1.

Another factor in Hyundai’s favour as it hunts for a spot in the top four is that its subsidiary, Hyundai Steel, churns out steel for HMC’s plants at a cozy price.

HMC’s production has also aided the development of Hyundai Steel, with 8,1- trillion won to be invested at the operation – which uses some iron-ore imported from South Africa – by 2015 as a third furnace is to come on line.

There is also talk of a fourth furnace.

While the second furnace satisfies auto demand, Ahrens does note that new furnaces will be able to “further support the auto business”.

Hyundai will be developing 225 grades of steel by 2012, with 50 of these for the automotive sector.

If everything conspires to work in Hyundai’s favour, it should see further healthy growth on a global level.

People do not always know what they want, but they normally know when they see it, and, at the moment, this is a Hyundai for many members of the car-buying public.

However, the vehicle manufacturer is currently at a product peak with several new, indeed exciting, vehicles coming out of its stable over the last two years, with still more to come in 2011 – but what happens after that?

Can Hyundai maintain its active new product flow? Can it secure brand loyalty among its many new customers so that people come back for a second or third vehicle? Can the company maintain quality standards?

These are questions only time – and perhaps 2011 and 2012 sales – can answer.

Edited by: Martin Zhuwakinyu
© Reuse this Comment Guidelines
 
 
 
 
 
 
 
 
Other Automotive News
Peugeot Citroën South Africa (PCSA) is “fighting as a team” to secure local assembly of the Peugeot 301 in South Africa, says PCSA MD Francis Harnie. He says the entry-level sedan is only available in left-hand drive at the moment, and that PCSA wants the...
Hyundai Automotive South Africa (HASA) sold around 50 000 new vehicles in 2013, a 5% drop from 2012 volumes. This decline follows an almost meteoric rise in sales over the last few years as South Africans warmed to the imported Korean brand. The total new vehicle...
Major changes have been announced at PSA Peugeot Citroën as it continues the fight to return to profitability and increase sales. It is especially the overseas markets that have taken a pummelling for the French manufacturer at the beginning of 2014, with the...
Article contains comments
More
 
 
Latest News
Few would argue with the notion that unemployment, which stands at around 25% on the narrow definition as reported by Statistics South Africa, remains one of the country’s most pressing challenges. Fewer still could contest the view that South Africa’s education...
Renewable-energy projects, such as this Northern Cape solar farm, seen as key to low‐carbon energy supply.
Upfront investment costs will and should remain a critical consideration as South Africa moves to upscale and accelerate its infrastructure programmes. But one of the lead authors of the latest Intergovernmental Panel on Climate Change (IPCC) argues that the...
The barrier to efficient water service delivery in South Africa was not of a technological nature but rather related to legal and Constitutional challenges, Water Research Commission (WRC) CEO Dhesigen Naidoo said on Thursday. Opening a WRC debate under the theme...
More
 
 
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
 
 
 
 
 
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
MORE IN SA Phase 2 should see local content on the mainline locomotive increase from 65% to 80% by the end of 2014
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks