Hyundai-Kia target speedy growth in India, look to leverage synergies

The Korean car assault on the Indian market is underway and even in depressed Indian conditions both Hyundai and Kia are on an upswing, more so due to the robust performance  of new models such as the Venue and Seltos. It helps that both models are SUVs, a segment which is running away with sales in the domestic market.

While​​ the Venue is Hyundai Motor India's second mass-market utility vehicle (UV) after recording much success with the bigger Creta, the Seltos is Kia Motors India's maiden offering that has given it a flying start. The Indian PV segment has been in shambles for more than a year with sales, in FY2020, declining15.95 percent between April and November 2019 to 15,705,447 units (April-November 2018: 18,686,895).

For Hyundai Motor India, its Venue compact crossover, since its introduction earlier this year in May, has been giving a tough fight to the segment stalwart Maruti Suzuki Vitara Brezza and has clocked 60,922 units between May and November. Venue's success has made the company enhance its UV market share to 19.18% between April and November 2019, compared to the 13.92% a year ago.

The Seltos, meanwhile, has in a scant four months grabbed a significant 6.34% UV market share with 40,581 units. The trailblazing performance of the Seltos has set the platform right for Kia Motors India and placed it in a confident position to aspire for more growth by bringing in new models in the coming calendar year.

Sibling rivalry?
While the Seltos has brought fortunes for Kia, at the same time, its presence has made even the mighty Hyundai Creta take a beating. The Kia Seltos became the No. 1 selling SUV in the country in October with sales touching 12,786 units, where the Hyundai Creta could only manage 7,269 units. Month-on-month, the Seltos compared to the Creta has seen strong growth: sales in August stood at 6,236 units (Creta: 6,001), September 7,554 units (Creta: 6,641) and November 14,005 units (Creta: 6,684). In the April-November 2019 period, Creta sales at 61,055 units are down a sizeable 28% (April-November 2018: 84,701).

Being part of the same parent group (Hyundai Motor Corporation) and being sibling brands, the duo cannot help but face some cannibalisation in sales when it comes to their current product portfolio for the Indian market, especially where the Seltos competes directly with the Creta in a segment which is witnessing the fastest growth rate within the entire PV segment. Even in these troubled times, UV sales have seen a 3.83 percent growth rate, when PVs overall have dipped 17.98 percent between April and November 2019.

Things start good for the combined Hyundai-Kia entity in India when one sees their growing market shares. Together, the Korean carmakers currently hold a 20 percent share of the PV segment in India, and constitute an even larger 25.52 percent share of the UV pie, even beating Maruti Suzuki India which stands at 25.07 percent. At the Group level, a little cannibalisation could be forgiven in favour of a larger strategic growth plan.

SS Kim, MD and CEO, Hyundai Motor India: "We (Hyundai and Kia) will continue to remain two different companies with two completely different strategies. What we would leverage  would be synergies in terms of back-end operations such as procurement, R&D and platform-sharing to reduce costs and bring value-addition, and therefore benefit the end customer."

Tapping synergies
Not surprisingly, the two are also looking to tap synergies to enhance Hyundai Motor Corp’s hold of the Indian PV market, give and take a little competition. The Korean duo is further enabling increased profitability and cost competitiveness by leveraging platform- and part-sharing to combine volumes to drive better component pricing with common suppliers.

In a recent interaction with Autocar Professional, SS Kim, MD and CEO, Hyundai Motor India, said, “A relevant differentiation in terms of product line-up, brand positioning and brand image will be there between the two brands and that is also our target, but, in some cases we may compete directly against each other. So, we will continue to remain two different companies with two completely different strategies.”

“We will never utilise each other’s production capacities – that question doesn’t arise at all –  and will always remain different companies when it comes to direct operations. What we would leverage, however, would be synergies in terms of back-end operations such as procurement, R&D and platform-sharing to reduce costs and bring value-addition, and therefore benefit the end customer.”

With the new Creta set to be launched in India in 2020, Kia might find it hard to sustain the initial growth experienced with the Seltos. But will Hyundai be able to regain its lost crown from its own sibling? According to Kim, “Yes, there might be certain cannibalisation to some extent, but it will be a very minimal one because that segment (midsized SUV) is growing at a fast pace and we plan to expand the overall market size together.”

Hyundai Motor Corp's bold new Strategy 2025
Kim also spoke about Hyundai Motor Corporation’s recently announced ‘Strategy 2025’ wherein the Group is planning to 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.

On December 4, the Korean car major had announced a bold roadmap, covering a host of new growth areas, to secure its position as a frontrunner in the future mobility industry. 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.

The company 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.

According to Kim, “Electrification would be the major factor of our long-term strategy, not only for Hyundai Motor India but also Hyundai Motor Corporation. But, regional and local implementation will be different depending upon each country’s specific situation. So, in case of India, because of the Indian government’s strong push on electrification of the automotive sector, we think that by 2030, electrification in the four-wheeler segment will be much more prevalent than what it is today even though there might be a lot of initial hiccups for the time being (short-term perspective) such as charging infrastructure, high duties, affordability, and a hesitant customer mindset.”

“I personally think that if the technology improves and advances in the future, there will be a reduction in the material cost of the battery which will also allow us to bring more reasonable solutions and options into this segment. So, from a long-term basis, it is a very viable option not only for Hyundai but for India in general,” he added.

“In our electrification strategy, India is a very important market and clearly, when I look at the world map, all I can see is that countries like Russia don't have any interest in electrification due to the thick green cover in Siberia; the current US president also doesn’t look the most interested in the technology; but countries like Korea and many of those in Europe are still looking towards newer means of sustainable mobility solutions and researching on how to maximise the energy management. Hence, they are looking at electrification and fuel-cell technology.

“One single powertrain option cannot explain the future at all, so there should be a coexistence of different technologies including ICE, EVs and fuel-cell vehicles,” concluded Kim.

Strategic export game-plan in place
Both Hyundai and Kia also have a strategic export game-plan in place to ship increased volumes of made-in-India passenger vehicles. It may be recollected that in early September 2019, Hyundai Motor India hosted an International Partner’s Meet 2019 in New Delhi.

The Chennai-based carmaker, which has been the largest passenger car exporter from India since inception, saw 60 of its global partners participate in a two-day meet. Partners representing Hyundai from several countries including South Africa, Saudi Arabia, Lebanon, Vietnam, Chile, Peru and Columbia participated in the International Partners Meet 2019 and many new markets like Ethiopia, Zambia and Ghana were also explored for export of the Atos (Santro in India). It was not long after that meet that the company began exporting the Venue to South Africa, where the SUV was launched in early December.

Kia Motors India too looks to be driving exports aggressively. The company, which has begun a second shift at its Anantapur plant to meet surging demand for the Seltos in the domestic market, kicked off its export drive in October and has already shipped 6,155 SUVs to overseas markets.

Between the two OEMs, a total of 138,955 PVs have been exported in the April-November 2019 period, accounting for 29% of total PV exports from India (April-November 2019: 474,311). Hyundai Motor India, with 132,800 (18.21%) is currently the export market leader, ahead of next-placed Ford India (90,939 units / -11.50%).

As 2020 opens, expect these two carmakers to make further moves to cement their position in the Indian PV market. Keeping watching this space for more on the subject. 

Also read: Hyundai Venue races past 50,000 sales in 6 months

Top 5 UVs – November 2019 | Kia Seltos on a roll, UV boss for second month in a row, grows market share to 6.34%