Hyundai Pays A Heavy Price In China, US For Having A Sedan-Loving Management

Despite Hyundai’s early success story in China, sales there have been steadily dropping for the past few years, as they do in the United States.

That’s mainly because the Korean car maker missed the shift in consumer tastes, particularly the SUV surge, and started commanding higher prices than its brand image could command, at least according to four Chinese dealers and half a dozen former and current US dealers, executives and employees, who spoke to Reuters.

Back in 2009, Hyundai and Kia’s combined sales in China placed the company in third position, following General Motors and Volkswagen. The Korean manufacturer now ranks ninth, with a market share in China dropping to 4 percent last year, from over 10 percent in 2009.

Industry experts and executives say that Hyundai conceded its stronghold in the low-end market to fast-growing Chinese rivals such as Geely and BYD. In addition, other foreign carmakers defended their market share in the more premium segments but also kept pricing competitive for mainstream models, squeezing Hyundai’s position in the market as an affordable foreign brand in the world’s largest auto market.

Hyundai is facing similar woes in the United States, where its market share fell to 4 percent last year, near a decade low for the Korean automaker.

Hyundai SUVs accounted for just 36 percent of its total US sales last year, compared to GM’s 76 percent and the industry average of 63 percent. The carmaker has already announced its plans to launch more SUV models, including the new Santa Cruz pickup truck for 2020, and to give its regional units more autonomy in order to quickly develop vehicles that are better suited to local tastes.

“One of our challenges back then, and I know it would continue to be a challenge, was that the management at (headquarters) was really big on sedans,” said Ed Kim, a Hyundai U.S. product manager between 2004-2008, now the vice president for California-based auto consultancy Auto Pacific.

“(U.S.) product planning staff, marketing staff really wanted more truck products, more SUVs, but in so many cases, it was very difficult to convince management,” Kim said to Reuters.

The task of reviving Hyundai’s success in the world’s top two car markets will fall on Euisun Chung, the company’s third generation leader. Chung was promoted to executive vice chairman, bringing him closer to succeeding his father and current chairman, Mong-koo Chung.

The younger Chung has already faced some setbacks as he was the one to unveil Hyundai’s “modern premium” brand vision back in 2011 to revamp the image of the company. Clearly this didn’t work as planned, but Euisun Chung is now hiring outsiders, investing in start-ups and forming partnerships with autonomous driving companies in a bid to return Hyundai back to its glory days.

Hyundai’s brand image has certainly gone up the past few years but still is “not anywhere near a premium brand”, according to Nick Reilly, a former chief executive of GM Korea. “So I think they have to go back to the mentality to be very price-competitive in order to maintain the volumes,” he added.