This is big news coming from Hyundai Motor Company. The Korean car major today announced a bold roadmap, covering a host of new growth areas, to secure its position as a frontrunner in the future mobility industry. Under the new roadmap, named Strategy 2025, the company will foster Smart Mobility Device and Smart Mobility Service as two core business pillars, aimed at facilitating the company’s transition into a Smart Mobility Solution Provider.
Hyundai’s plans for Smart Mobility Device include a wide range of product groups beyond automobiles such as Personal Air Vehicle (PAV), robotics, and last-mile mobility. These two pillars sit atop three key directions that the company has defined: enhancing profitability in internal combustion engine (ICE) vehicles, securing leadership in vehicle electrification, and laying the groundwork for platform-based businesses.
Targeting 670,000 EV sales per annum by 2025, modular EV platform
In particular, Hyundai aims to secure leadership in electrification by selling 670,000 electric vehicles annually and become one of the world’s top three manufacturers of battery and fuel cell EVs by 2025.
This will comprise 560,000 BEVs and 110,000 fuel-cell electric vehicles (FCEVs). The goal is to electrify most new models by 2030 in key markets such as Korea, US, China, and Europe, with emerging markets such as India and Brazil following suit by 2035.
The Genesis brand will launch its first fully-electric models in 2021, before expanding its electric line-up in 2024. The high-performance N brand also plans to launch SUVs and EVs, further boosting Hyundai’s competitiveness in electrification.
In particular, Hyundai is to address vehicle electrification by first targeting younger demographics and enterprise customers with affordable battery electric vehicles (BEVs) to achieve economies of scale.
For cost innovation, the company will adopt a new global modular EV architecture to enhance efficiency and scalability of product development, starting with vehicles being launched in 2024. The company also has plans to revamp its sales model through network optimization and new sales methods, to optimise production based on demand, and to expand partnerships with other OEMs.
Big-ticket investment in R&D
On the Smart Mobility Service side, the company will aim for a business model that combines product and service and launch an integrated mobility platform to offer customers personalised contents and services.
To this end, Hyundai will earmark KRW 61.1 trillion of investment until 2025 for research and development (R&D) and further exploration of future technologies.
Over a six-year period from 2020 through 2025, the company will invest a total of KRW 61.1 trillion, or roughly KRW 10 trillion per year, in R&D and future core technologies to smooth its transition into a Smart Mobility Solution Provider. In particular, KRW 41.1 trillion will be allocated for product and capex to enhance competitiveness in existing businesses, while approximately KRW 20 trillion will be dedicated to future technologies including electrification, autonomous driving, AI, robotics, PAV, and new energy area.
Operating margin of 8% and 5% of global vehicle market
In the same timeframe, the company will target an operating margin of 8 percent in its automotive business, which rolls over from the previous target of 7 percent by 2022. The Korean major is also aiming for a 5 percent share of the global vehicle market.
Hyundai’s goal to achieve 5 percent market share in the global automotive industry by 2025 is a 1 percentage point increase from roughly 4 percent achieved in 2018. To meet this target, the company will address fluctuating demand in individual markets with regional flexibility and offer competitive mobility services.
Separately, Hyundai announced plans to conduct a KRW 300 billion share buyback by February 2020 as part of its continuous efforts to boost shareholder and stakeholder value and enhance transparent communication with the market.
Customer-focused global growth strategy
Hyundai’s comprehensive mid- to long-term strategic direction was presented by the company’s President and CEO Wonhee Lee during the 'CEO Investor Day' forum held today in Seoul.
“The key to our future strategy is to focus on customers and to present the most desirable products and services. We want to offer smart mobility experiences that meet shifting needs of our customers by leveraging advanced technology,” said President Lee. “Transforming into a Smart Mobility Solution Provider with comprehensive mobility solutions that combine devices and services will be the centrepiece of Hyundai’s future strategy”
Quality innovations will maximize customer value based on three smart elements: innovative digital user experience (UX), artificial intelligence (AI) based connected services, and safety-first autonomous driving. With regards to autonomous driving technology, SAE Level 2 and 3, as well as Advanced Driver Assistance System (ADAS) for parking, will be available in all models by 2025, alongside the company’s aim to develop a full autonomous driving platform by 2022 and begin mass production by 2024. Hyundai's plan to offer differentiated vehicle features to customers is expected to reduce incentive spending and improve customer perception of the brand.
Betting big on Smart Mobility Service
Smart Mobility Service will be a key future growth driver for Hyundai, bringing together device and service to offer customers a personalized mobility lifestyle.
The company plans to leverage its existing customer base to provide services linked to vehicles, including maintenance, repair, financing, insurance, and charging. It will also make efforts to reach a broader group of customers with a more comprehensive range of services. Hyundai will build an integrated mobility platform that analyses data from in and around the vehicle through car connectivity. Through an enhanced understanding of customers, the company will offer services tailored to the needs of customers in every aspect of their lives, including shopping, delivery, streaming, and multi-modal mobility services.
Strategy 2025 also details regional optimisation for Smart Mobility Service. In the US, car sharing and robotaxi service demonstrations will capitalise on the anticipated commercialisation of autonomous vehicles of SAE Level 4 or higher. In Korea, Asia, and Australia, Hyundai plans to enter the mobility service market by partnering with leading local players. In Europe and Russia, where the service industry is mature, the company will first focus on businesses that combine products and services.
Organization and management reform plans are also in place for the successful implementation of Strategy 2025. The company will adopt new systems for data-based decision making, employee performance management, process innovation, and next-generation enterprise resource planning (ERP). It will also create a more flexible organizational structure and foster a harmonious corporate culture centered around communication and collaboration.
The six-year investment plan has been refreshed and updated from the company’s existing plan – announced in February 2019 – under which the company disclosed a KRW 45.3 trillion spending plan in the 2019-2023 period.
Targeting increased synergies in global supply chain
An array of cost innovation programs – such as platform integration, standardised vehicle architecture, and commonisation of parts – will help boost efficiency in the company’s parts supply chain. Vehicle architecture processes will be optimized by region, and innovative manufacturing technologies will be implemented to further enhance efficiency and profitability.
An improved product mix, combined with competitive new models, will help reduce incentive spending, while pre-emptive quality control efforts will decrease quality-related costs. The company will also pursue increased investment efficiency for the Genesis brand.
Hyundai also announced plans to buy back KRW 300 billion worth of its own shares from the market by February next year as part of its efforts to boost shareholder value and market-friendly policies.
"Hyundai will always prioritise its customers and strive to connect people's lives with quality time,” said President Lee. “We will do our utmost to equip ourselves for the future, to lead the future mobility industry, and maximize shareholder value.”