South Korea’s Hyundai Motor will launch the luxury brand Genesis in China while keeping its sales target conservative this year as it continues to lose ground in the world’s biggest auto market.
The wholesale volume of Beijing Hyundai Motor, the Chinese joint venture of Korea’s biggest automaker, shrunk 13.1 percent year-over-year to 686,390 units in 2019, according to the China Passenger Car Association (CPCA) on Tuesday.
Its share in China’s passenger vehicle market last year was 3.2 percent, slipping four notches to 13th. It fell well short of its annual sales target of 860,000 units in the market.
Hyundai Motor sales in China have failed to recover after Beijing in 2017 initiated a boycott of Korean products to protest against Seoul’s deployment of a U.S.-backed antimissile shield. Its void was quickly replaced by Chinese brands.
Hyundai’s annual sales, which had stayed above 1 million units until 2016, dwindled to 785,000 in 2017 and 686,390 in 2019.
The blow has been even harder on Hyundai’s smaller sibling Kia Motors. Dongfeng Yueda Kia, its joint venture in China, suffered a 23 percent on-year drop in sales at 284,335 units last year, according to the company. After enjoying annual sales of more than 600,000 units from 2014 to 2016, its sales slumped to 360,000 in 2017.
Experts say Korean brands have lost their edge against Chinese marques and failed to beat traditional Western favorites, finding themselves in an awkward position in a market that is quickly losing steam. According to the CPCA, China sold 21.04 million cars in 2019, down 7.5 percent on year, with the market rapidly polarizing into high-end luxury makers and cheap local players.
“Even American automaker General Motor, which was caught in the crossfire of the U.S.-China trade war, and Volkswagen Group, reeling from a massive emissions cheating scandal, managed to do well in China,” said Lee Hang-gu, a researcher at the Korea Institute for Industrial Economics & Trade. “The Korean automakers’ poor performance should raise fundamental questions about their overall competitiveness in China,” he added.
Hyundai Motor has trimmed this year’s sales target in China by 110,000 units to 750,000 amid projections that sales in the world’s largest auto market are likely to slip for the third straight year in 2020. It is looking to drive up demand with the all-new Sonata and Elantra sedans set to hit the Chinese market this year.
There have also been organizational changes. Greater autonomy was afforded to the Chinese holding entity to speed up local decision-making. The company also completed a major reshuffle in October, replacing the head of its Chinese operations and naming a former Volkswagen executive to lead its R&D center in China.
The company, on its fourth-quarter earnings call, said it would shore up its Chinese business by rationalizing production lines and optimizing inventory, and expected sales to pick up in the second half of the year following the string of new releases.
The automaker is pinning high hopes on its luxury Genesis brand, which is poised to enter China and Europe this year. In December, it appointed Markus Henne, former Mercedes-Benz vice president, as chief executive of Genesis Motors China. Genesis recently bolstered its lineup with the launch of its first sport utility vehicle, the GV80.
Hyundai Motor reported a sharp jump in its final quarter earnings thanks to robust SUV sales and favorable currency rates. In the three months ended December, its operating profit more than tripled from the previous quarter and surged 148 percent from a year earlier. Kia Motors also saw its earnings more than double on quarter and jump 54.6 percent on year.
By Park Yun-gu and Kim Hyo-jin
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]