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
6
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
10
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
12
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
14
Ⅲ. Success factors of Hyundai in china 1. Business status in China 2. Sales performance 3. Success factors in China
15
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
18
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
20
Ⅳ. Future Direction
21
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
22
