Success factors of Hyundai and future direction in China Success ...

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1. Ⅰ. Current Status of Chinese Automotive Market. Ⅱ. The Importance of China in Hyundai Global Strategy. Ⅲ. Success Factors of Hyundai in China. Ⅳ. Future ...
Success factors of Hyundai and future direction in China

2007. 6.

0

Table of Contents

Ⅰ. Current Status of Chinese Automotive Market Ⅱ. The Importance of China in Hyundai Global Strategy Ⅲ. Success Factors of Hyundai in China Ⅳ. Future Direction

1

Ⅰ. Current Status of Chinese Automotive Market 1. Demand (1) Low penetration rate (2) Growth pattern of car market (3) Sales by type and segment

2. Supply (1) Expansion of capacity (2) Sales by makers (3) Sales portion of top-ten models

3. Significant movements in market 2

1. Demand_ (1) Low penetration rate z

The number of registered cars greatly increased, but the penetration rate is still very low Æ Very high growth potential − Total registration increased more than twice compared to 2000, especially in passenger cars. − Number of cars per 1,000 persons is 16.5, very low compared to 33.5 in Thailand

Vehicle registration

Number of cars per 1,000 persons (2005)

(unit : 10,000 units, %)

 

Total

Passenger Vehicle

Commercial Vehicle

2000

1,369.3

490.4

878.9

2001

1,524.3

554.8

969.5

2002

1,754.8

677.5

1,077.3

(unit )

2,076.7

864.5

1,212.2

2004

2,628.9

1,735.9

893.0

2005

3,159.7

2,132.5

1,027.2

Average Annual Growth Rate

18.2

34.2

3.2

53.2

Thailand

China

2003

232.3

Korea

16.5

Philippines

9.5

India

6.9

0 50 100 * Source : Korea Automobile Manufacturers Association

150

200

250 3

1. Demand_(2) growth pattern of car market z

Passenger car sales growing rapidly since 2000: Growth accelerates as portion of Individual Sales increases Average growth rate ’00~’06 - Sales in 2006 records 5,120,000 units, 7 times more than 2000 42.5% Growth Rate Unit: 10,000 units

515

64.5% Growth Rate 70.6%

313

Average Growth Rate ’92~’00 25.2%

215

16

25

39

49

57

61

78

249

126

1992 1994 1996 1997 1999 2000 2001 2002 2003 2004 2005 2006 ▣ VW as Market Leader (M/S above 80%)

▣ Public purchase occupies above 80% of the market

▣ Entrance of Foreign Makers into China → GM(’97), Honda(’98), Kia(’99), Fiat(’99), Toyota(’00)

▣ Rapid Growth after WTO Accession ▣ More Foreign Makers into China →Ford(’01), Nissan(’02), Hyundai (’02)

▣ Growing Purchase for Private Use → Above 60% in 2002 4

1. Demand_(3) Sales by type and segment z

By segment in passenger cars, the portion of C segment has grown from 23% in 2000 to 37% in 2006; The portion of D segment has decreased from 40% to 9%, due to increasing individual sales

Sales by Vehicle Types

PV Sales by Segment

(unit : 10,000 units, %)

 

Total

PV

2000

CV

2000

209.3

61.1

148.2

2001

237.7

78.1

159.6

2002

324.8

126.5

198.3

2003

439.1

215.4

223.7

2004

507.2

248.8

258.4

2005

575.8

313.2

262.6

2006

722.0

512.0

210.0

Average Annual Growth Rate

기타 E M PV 1% 10% 1% A 9% D 40%

B 15%

C 23%

A : Mini B : Small C : Lower-medium

2006 A 7%

B 21%

D : Medium E : Large

D 9%

22.9

42.5

6.0

C 37%

* Source : Fourin’s Chinese Automotive Industry 5

2. Supply_ (1) Expansion of capacity z

z

Capacity increased 5mil from that of 2001, as foreign makers entered and expanded capacity The problem of overcapacity emerged: extra capacity beyond demand

Production

(10,000 units)

Capacity

800

706.5 645.7

700 600

485.7

500 373.0

400 300 200 100

430.1

210.5 77.3

266.0

313.5 218.9

248.8

122.7

0 2001

2002

2003

2004

2005

2006

* Source : Fourin’s Chinese Automotive Industry

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2. Supply_ (2) Sales by makers z

As major players enter, competition gets severe and ranks change dramatically − Noticeable growth of the Chinese makers

 

2001

 

2002

2003

Makers

sales

Makers

sales

Makers

1

Shanghai VW

23.0

Shanghai VW

2

Yiqi-VW

13.1

Yiqi-VW

3

Xiali

7.0

Shanghai GM

4

Shanghai GM

5.8

Xiali

9.5

GuangzhouHonda

5

Dongfeng PSA

5.3

Dongfeng PSA

8.5

Dongfeng PSA

6

GuangzhouHonda

5.1

Changan Suzuki

6.5

Xiali

7

Changan Suzuki

4.3

GuangzhouHonda

5.9

Changan Suzuki

8

Chery

2.9

Chery

5.0

Chery

9

Geely

2.2

Geely

4.4

Geely

10

Fengshen

1.7

Fengshen

4.1

Fengshen

2004 sales

makers

2005 sales

makers

2006 sales

makers

sales

30.1 Shanghai VW

40.5 Shanghai VW

35.4 Shanghai GM

32.5 Shanghai GM

40.6

20.8

30.2

30.0 Shanghai VW

25.0 Shanghai VW

34.9

20.7 Shanghai GM

25.2

Yiqi- VW

24.0

Yiqi-VW

34.5

11.7

GuangzhouHonda

20.2

Beijing Hyundai

23.4

Chery

30.2

10.5

Changan Ford

15.9

GuangzhouHonda

23.1

Beijing Hyundai

29.0

Xiali

19.0

GuangzhouHonda

26.0

Chery

18.9

FAW Toyota

20.8

Dongfeng Nissan

15.8

Geely

20.4

Geely

15.0

Dongfeng Nissan

20.4

Dongfeng PSA

14.0

Dongfeng PSA

20.1

Yiqi-VW

11.1 Shanghai GM

10.5 10.2

Yiqi-VW

Xiai Changan Suzuki

9.1 Beijing Hyundai 7.2 6.6

Geely Dongfeng PSA

13.0 11.0

10.3 9.7 8.9

•Source : Fourin’s Monthly Report on the Chinese Automotive Industry 7

2. Supply_ (3) Sales portion of top-ten models z

The sales portion of top-ten out of total sales decreased - Market faces intense competition 2001

2002

2003

2004

2005

2006

  Makers

sales

Makers

sales

Makers

sales

Makers

sales

Makers

sales

Makers

sales

1

JETTA

9.7

JETTA

12.1

JETTA

14.3

JETTA

15.4

CHARADE

18.0

JETTA

17.7

2

SANTANA

9.5

SANTANA

9.9

SANTANA

12.3

SANTANA

13.3

ELANTRA

17.7

EXCELLE

17.7

3

SANTANA2000

7.0 SANTANA2000

9.5

PASSAT

12.2

CHARADE

11.3

JETTA

14.2

ELANTRA

17.0

4

PASSAT

6.4

CHARADE

8.4

CHARADE

9.6

ACCORD

10.5

QQ

11.6

CHARADE

16.2

5

CHARADE

6.0

PASSAT

7.9 SANTANA 2000

9.3

ELANTRA

10.3

EXCELLE

11.5

QQ

13.2

6

CITROEN ZX

5.3

SAIL

5.6

BUICK REGAL

9.0

EXCELLE

9.2

ACCORD

11.4

ACCORD

12.3

7

ACCORD

5.1

CITROEN ZX

5.3

ACCORD

8.0 SANTANA 3000

9.0

SANTANA

9.4

PASSAT

11.4

8

ALTO

3.3

BORA

5.2

BORA

7.8

7.5

MERRIE

7.6

QIYUN

10.1

9

AUDI A6

3.1

QIRUI

5.0 CHANG'AN ALTO

6.1 BUICK REGAL

7.3

COROLLA

10

SAIL

2.8

ALTO

4.9

5.3

6.3

PASSAT

AUDI A6

PASSAT

BORA

6.7 SANTANA 3000

8.3

6.7

8.0

COROLLA

Sum(A)

58.4  

73.7  

94.0  

100.1  

114.8  

131.8

Total market(B)

78.1  

126.8  

215.4  

248.8  

315.4  

426.1

74.8%  

58.1%  

43.6%  

40.2%  

36.4%  

30.9%

Share(A/B)

•Source : Fourin’s Monthly Report on the Chinese Automotive Industry 8

3. Significant movements in the Chinese auto market z

Customer Customer

z z

Customer Customer Choice Choice

Energy/Environment Energy/Environment

Used-cars Used-cars

entrance of large number of foreign makers, variety of product range, and price cut → wider customer options

z

z z

z z

Regional Regional model model

z

Strategy Strategy

z

Increasing Increasing demand demand for for SUV/MPV SUV/MPV

Decreasing portion of public purchase Private demands drive market demand Increasing demand for Large and luxury cars by individuals and foreign companies

z z

Auto policies focused on highly efficient cars and alternative energy Sales of small car is expected to increase with the fuel efficiency regulation Used car market influences new car demand A used car market is still premature due to Chinese’s preference for new cars

expensive and high technology cars for coastline city markets low-priced models for inland small and medium city demands

Increasing interest and demand for RVs Currently less competitive, but Joint ventures and Chinese makers have adopted an aggressive strategy for RV market. 9

Ⅱ. The Importance of China in Hyundai Global Strategy 1. Global status (1) Production Trend (2) Regional production (3) Regional sales

2. Importance of Chinese market

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1. Global status _ (1) Production trend z

z

Since 2000, High growth rate following Toyota - Production rank: 9th in 2001 Æ 6th 2006 The portion of overseas production of Hyundai-Kia increased with new overseas production bases

Domestic/overseas production Domestic 해외비

(만

Overseas

Top global vehicle manufactures

100.4

400

30.0% 74.3 26.6%

 

2001

2002

2003

2004

2005

2006

1

GM

GM

GM

GM

GM

TOYOTA

2

FORD

FORD

TOYOTA

TOYOTA

TOYOTA

GM

3

TOYOTA

TOYOTA

FORD

FORD

FORD

FORD

4

VW

RenaultNissan

RenaultNissan

RenaultNissan

RenaultNissan

RenaultNissan

5

RenaultNissan

VW

VW

VW

VW

VW

6

DCX

DCX

DCX

DCX

DCX

HyundaiKia

7

PSA

PSA

PSA

HyundaiKia

HyundaiKia

DCX

8

HONDA

HONDA

HyundaiKia

PSA

PSA

HONDA

9

HyundaiKia

HyundaiKia

HONDA

HONDA

HONDA

PSA

10

FIAT

FIAT

FIAT

FIAT

SUZUKI

FIAT

48.8 300

14.1

21.0%

29.0

10.5

20.0%

15.3% d

200

10.4% 269.4 249.8 5.2%

257.4 236.5 4.3%

278.8

276.8

100

10.0%

0.0% 2001 2002 2003 2004 2005 * Source : HYUNDAI/KIA MOTORS

2006

* Source : Global Insight. 2007. 3. 11

1. Global status _ (2) Regional production (in 2006) z

New era of global production: Hyundai’s US plant in Alabama (May, 2005) and Kia’s Slovakian plant (Dec, 2006) now in operation

Czech Plant(Hyundai) (Ground breaking in ’07)

Georgia Plant(Kia) (Ground breaking in ’07]

China

Europe Hyundai 610(1.6%)

406(10.8%) - Hyudai 290 - Kia 116

Korea

NA

2,768(73.3%) - Hyundai 1,618 - Kia 1,150

237(6.3%)

India Hyundai 302(8.0%)

* Source : HYUNDAI/KIA MOTORS

* Based on CBU(excludes CKD) ( ) : portion Units: 1,000

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1. Global status (2) Regional sales (in 2006) z

Recorded most high growth rate following Toyota since 2000

Europe

China

834(20.4%) M/S 3.9% - Hyundai 500 - Kia 327

437(10.7%) M/S 6.5%

Korea 830(20.3%) M/S 70.7%

- Hyundai 311 - Kia 126

- Hyundai 561 - Kia 269

Middle East 610(14.9%) M/S 20.5% - Hyundai 151 - Kia 459

India

A/P

186(4.6%) M/S 12.6%

189(4.6%) M/S 2.1% - Hyundai 114 - Kia 73

NA 861(21.1%) M/S 4.4% - Hyundai 526 - Kia 324

SA 141(3.5%) M/S 4.2% - Hyundai 93 - Kia 50

( ) : portion * Source : Global Insight. 2007.3

Units: 1,000 13

2. Importance of Chinese market z z

z

Carry out growth strategy through globalization China is one of the most potential growth markets, easy to catch an opportunity of growth as global competition just begin Success in China is the main key to successful globalization

Necessity of global strategy

Limited marginal growth rate - Weak Korean market

Meet exchange rate risk - Decreasing profit from export

Importance of China

Giving Giving new new opportunity opportunity -- AA second second domestic domestic market market

Test Test field field of of building building up up brand brand value value && price price competitiveness competitiveness Cope with increasing trend of FTA & economic blocks

Main Main key key for for global global success success

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Ⅲ. Success factors of Hyundai in china 1. Business status in China 2. Sales performance 3. Success factors in China

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1. Business status in China z z

z

BHMC is a joint venture between HMC(50%) and Beijing Automotive(50%) Began production with a single model(50,000 unit production capa), BHMC has been increasing line-up & production capa as demand goes up. BHMC will have 600,000 capacity when the 2nd plant is completed in 2008

BHMC

Production plan 1st plant

Hyundai HyundaiMotor Motor Corporation Corporation

2nd plant

Beijing BeijingAutomotive Automotive

Phase#1

Phase #2

Phase #3

Time

Dec. 2002

April. 2004

May. 2005

2008

Beijing Hyundai Motor Company

Capacity (units)

50,000

150,000

300,000

300,000

(Total Investment : $ 510mil)

Production /hour (units)

12

36

68

-

Sonata

Sonata, Elantra

Sonata, Elantra, NF, Tucson, Accent

4models

50%

50%

Models

* Source : BHMC

16

2. Sales Performance z z z z

Sales CAGR 77% since 2003 Annually at least 1 model has been released to meet high demand increasing Expanding dealer network as sales goes up Aiming 600,000 unit sales in 2010

BHMC’s Sales by Model

Sonata

(Units: 1,000) 350

Elantra

NF

Tucson

Accent

Total

300

290 236

250 200 150

170

103

100 52 52

50 0

177

144

41

9 5

1 2002

45

2003

2004

2005

42

37 28 13

2006

* Source : BHMC 17

3. Success factors in China

Fast Fast decision decision

• Quick decision making & powerful driving force that is called ‘Hyundai speed’ - 2002 Feb: MOU contract Æ May: main contractÆ Dec: production begin

making making && drive drive

• Even though Hyundai made inroad into China late, comparing other key players, still made successful debut with ‘Hyundai speed’

Cooperation Cooperation with with Chinese Chinese government government

• The first JV project with foreign company certificated by government after China joined WTO • Cooperation with government became an important base to drive business – Hyundai products selected as Beijing taxi & official cars of government

• Increased line up: Middle seg→Small seg(EF Sonata→AvanteXD) • Selected Sonata for the first model considering motorization trend( largeÆmediumÆ

Precise Precise && excellent excellent survey survey of local of local markets markets

small) in emerging markets • Understood the essence of Chinese culture, then launched models that have equipments economically • Made an appeal to Chinese with products that had streamed line designs & volume looks

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3. Success factors in China

• From the beginning, introduced new models not like other foreign makers did

Launching Launching the the latest latest model model

- Foreign makers usually introduced old models, ceased production in advanced countries • Reforming new models for local needs - The specification, interior & exterior

Pushing Pushing into into with with long-term long-term friendly friendly suppliers suppliers

• Stabilization of quality & production by doing cooperation with suppliers - Early stage: 32, Current: 89 suppliers • Creating more jobs that contribute the local economy Æ corporate image up

• Raised productivity using the improved automation & module production system

High High productivity productivity

- productivity remarks as plants of Korea • Made a flexible system

19

3. Success factors in China

• Selected ‘Happiness of Chinese people’ as the best value of the company • Donated 10 sonatas to the SARS relief center, when SARS broke out in 2003

Building Building up up corporate corporate image image

• Derived social welfare service such as holding ‘the night of Beijing China’, supporting a scholarship, donating computers • Supported tournament such as Football games

• Geographical advantages (neighboring districts)- Close cooperation with the

Etc Etc

headquarter in Seoul Korea • Hiring local people – minimize the gap of cultures & languages

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Ⅳ. Future Direction

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Future Direction • Giving ‘The significant value of Hyundai’

Building Building precise precise brand brand image image

- Developing a model having the factors of Hyundai, also the model should be differentiated from global & local makers • Pumping up the brand image during Beijing Olympic & World Trade Fair

• Developing localized model

Enhancement Enhancement of of localized localized strategy strategy

- Injecting Chinese preference into the product from product development • Aiming to grow with Chinese enterprises - Searching & promoting local suppliers

Lifting Lifting up up price price

• improving production system for cost innovation

competitiveness competitiveness

• Mutual cooperation to contribute Chinese auto industry

Raising Raising up up corporate corporate image image

• Making friendly image with social welfare service - Building corporate image that contributes the great Chinese

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