Author | Nie Yiyao
On November 5th, Beijing Hyundai held its 20th anniversary celebration in Chengdu, and took the opportunity to release two new models, the all-new Fiesta N Line and the 5th generation Tucson L 8AT, and announced the “New Plan for 2025”.
The “New Plan for 2025” proposes to achieve an annual sales target of over 500,000 units by 2025 through product transformation, brand innovation and service innovation, driving Beijing Hyundai out of the sales slump.
At the same time, at the China International Import Expo which opened in Shanghai on November 6th, Hyundai exhibited the hydrogen fuel cell vehicle NEXO China Edition. NEXO is currently the world’s leading hydrogen fuel cell vehicle in terms of technology and sales volume. According to official sources, the NEXO China Edition will be officially introduced into China within the year.
The joint actions in Chengdu and Shanghai have reignited industry attention on Beijing Hyundai. Having gone through the rise, glory, decline and struggle over the past 20 years, Beijing Hyundai is now standing at the milestone of its 20th anniversary, and facing the opportunity of the era of automotive electrification and intelligentization. Beijing Hyundai is making every effort to demonstrate its determination and patience for a fresh start.
But what people are more concerned about is, in the turning point of the era from self-improvement and loss of joint ventures, attacking new energy and retreating from traditional fuel vehicles, how many aces and winning opportunities are still possessed by Beijing Hyundai, this joint venture brand that has experienced ups and downs? Will the era favor Beijing Hyundai again, and is there still a future for Beijing Hyundai?
20 years of fleeting time
Beijing Hyundai was established on October 18th, 2002. For both Hyundai Motor Company from South Korea and Beijing Automotive Group, the establishment of the joint venture company was a very important beginning.The engine of the development of the business in China for Hyundai Motor Company began; while Beijing Automotive Group also swept away the worries of poor sales of Beijing Jeep and gained a new market grip.
From 2002 to 2022, twenty years can make a person cross the mountains and seas of life, or a company to traverse the changes of the world.
When Beijing Hyundai was established, it was less than a year since China’s accession to the WTO. As the first joint venture automotive project after China’s accession to the WTO, Beijing Hyundai perfectly embarked on China’s high-speed development of the automotive industry’s “Golden Decade”.
Looking back now, these ten years were also Beijing Hyundai’s “Golden Decade”, from a newborn baby to rapid growth.
First, in 2002, the contract, construction, establishment, and production were completed in one go, and on December 23, 2002, Beijing Hyundai’s first car, the Sonata, was produced, laying the foundation for the well-known “Beijing-Hyundai Speed”.
In 2008, Beijing Hyundai welcomed its one millionth car off the production line, followed by its two millionth car in 2010, exceeding three million cars produced and sold in 2011, and four millionth car produced in 2012.
By 2013, Beijing Hyundai not only accumulated sales of over five million cars, but also achieved annual sales of over a million in that year, reaching 1.03 million vehicles. By joining the “Million Club” of China’s automotive industry in the shortest time and fastest pace, it became the fourth mainstream passenger car brand in China with annual sales of over a million.Later, Beijing Hyundai achieved a cumulative production and sales of 10 million vehicles in 2018. As former chairman of BAIC Group, Xu Heyi put it: “Among the five joint ventures that first exceeded 10 million cumulative production and sales in China, SAIC-Volkswagen took 30 years from the first car to the ten millionth, FAW-Volkswagen took 23 years, SGMW took 17 years, Dongfeng Nissan took 15 years and 2 months. Beijing Hyundai took 16 years, ranking second only to Dongfeng Nissan.”
However, when the former chairman made this comment, Beijing Hyundai was already on the decline. From 2013 to 2016, Beijing Hyundai maintained brilliant sales of 1.03 million, 1.12 million, 1.06 million, and 1.14 million respectively. Since 2017, sales have been decreasing rapidly.
From 2017 to 2021, Beijing Hyundai’s sales were 820,000, 782,000, 685,000, 385,000 and 360,000 respectively. In the first three quarters of 2022, Beijing Hyundai’s cumulative sales were 177,100 vehicles, a year-on-year decrease of 32.13%.
Time has frozen, trapping Beijing Hyundai.
Half Advantages and Half Opportunities brought Glory
Joint venture brands were pioneers and prospectors in the early development of China’s automobile industry. Compared with domestic brands, joint venture brands had advantages in technology, production, and operation due to their comprehensive advantages in these areas. Therefore, in the early stage of industrial development, joint venture brands led domestic brands by several positions.During the period from 2001 to 2011, also known as the “Golden Ten Years” of China’s automobile industry, with an annual growth rate of over 20%, joint venture brands dominated the market and swept across the industry, including German, American, Korean, French, and Japanese brands, all of which took advantage of the market. By 2011, joint venture brands not only occupied 60% of the market share but also had an absolute dominance in the high-end market.
In contrast, domestic brands enjoyed far less market advantages. Although domestic brands had managed to catch up and took 40% of the market share in 2011, they were not comparable to joint venture brands in terms of product strength, brand power, or premium level, and could only conquer the low-end market.
Therefore, it was difficult for joint venture brands to sell poorly during that period. For example, Korean cars were fashionable, well-equipped, and obviously superior to domestic brands in terms of product strength. With moderate compact family cars and high cost-effectiveness among joint venture brands, Korean cars quickly swept the market.
Especially for Beijing Hyundai, with the above selling points, they easily took over the market. Elantra, ix35, Sonata, Elantra’s successor models Yue Dong and Lang Dong, and Reina were all heavy-duty models that Beijing Hyundai sold quickly during that time.
The Diaoyu Islands incident in 2012 helped to boost Beijing Hyundai’s sales that year and enabled it to enter the million-selling club later on.
Therefore, Beijing Hyundai’s rapid development during the “Golden Ten Years” and its glorious achievement of continuous annual sales of one million were partly due to its own strengths and partly due to the opportunities of the times. So, the saying goes, “the times make the heroes.”During that period, independent brands such as Geely, Changan, BYD, and Great Wall had not yet risen, and market demand had not upgraded consumption. Top and second-tier luxury brands had not yet explored the lower-end market. After experiencing such an event, Japanese brands needed to recover from their injuries and take a rest. Therefore, Korean, American, and French brands each welcomed their best years during this period.
Stagnation means regression: “The Lost Five Years”
However, time does not always remain peaceful. For more enterprises, glory often signals the beginning of endless loneliness.
Starting from 2015, joint venture brands began to experience a domino effect of falling sales. Dongfeng CV and then Dongfeng PSA experienced a significant decline in sales in 2015 and 2016, respectively. In 2017, Beijing Hyundai, Changan Ford, and Dongfeng Yueda Kia joined the list of joint venture brands suffering from falling sales, making 2017 a collective “collapse year” for joint venture brands.
Beijing Hyundai’s hidden danger had already emerged in 2015. In pursuit of sales, it aggressively pushed for inventory pressure on dealers and lowered selling prices, leading to the collective withdrawal of four Beijing Hyundai dealerships overnight in Shanghai in 2014. The phenomenon reoccurred in 2015 with more dealerships withdrawing in Beijing.
Although Beijing Hyundai eventually maintained sales of over a million units in 2015, a thousand-mile embankment could be destroyed by an ant hole. Pursuing visually appealing numbers without considering the cost behind them only brings danger closer and closer.
Moreover, independent brands also made significant progress during this period, especially in 2015, when their market share increased from 29.2% in 2014 to 33.6%, a growth of 4.4%, achieving a substantial breakthrough in sales and market share. In the following four years, the market share remained above 33%.The market structure that used to be clearly divided by “joint venture brands targeting above 100,000 yuan and domestic brands targeting below 100,000 yuan” has been broken. Both sides have begun to compete head-on in the above-100,000-yuan market. Moreover, consumers have greatly increased their premium for domestic brands, and even the strong brands have surpassed the joint venture brands that have experienced declining sales since 2015.
Meanwhile, Beijing Hyundai’s strategy is still to play the “beauty” card and some people say that Beijing Hyundai’s “fluid sculpture” design is simply beautiful, while others say that it is “the lowest-priced joint venture brand” that emphasizes “cost-effectiveness”. However, they don’t improve their product and brand strengths.
Even people within Beijing Hyundai said, “In the past few years, our focus was all on selling cars, and we didn’t pay enough attention to improving our brand strength. We developed smoothly, but we didn’t have a sense of crisis.” The result is the “lost five years” since 2017.
Although the 2017 THAAD incident was the trigger for the decline of Korean brands, the root cause was ultimately due to the lack of improvement in product and brand strengths. This problem is not unique to Beijing Hyundai but also exists among joint venture brands such as Changan Ford, Dongfeng Citroen, and Dongfeng Peugeot.
In the business world, if you’re not making progress, you’re falling behind; that’s the truth.
Looking Forward to 2022
In the face of difficulties, Beijing Hyundai has not been idle. When its 10 millionth car was delivered in 2018, former Beijing Hyundai Chairman Chen Hongliang stated that “Beijing Hyundai is accelerating the introduction of new cars, planning to launch three new models, two modified models, and three new energy models in 2019. We will rely on Hyundai Motor’s leading R&D capabilities around the globe to bring cutting-edge technology in autonomous driving, intelligent interconnectivity, and new energy fields to Beijing Hyundai’s products.”
Beijing Hyundai delivered its 10 millionth vehicle, a brand-new Sonata plug-in hybrid (PHEV), to a user on the same day.
However, fate seemed to test Beijing Hyundai. In 2019, according to plan, Beijing Hyundai launched plug-in hybrid versions of Leahead, pure electric versions of ixinuo and Fista, and released the “SMART+ Strategy” advocated by Hyundai’s new energy technology and concept. The cold winter and the subsequent COVID-19 epidemic in the auto market greatly affected the implementation of Beijing Hyundai’s established strategy. Years of frequent changes of leadership and factory shutdowns have further intensified the brand’s struggle to survive in the storm.
Fortunately, the hope of Beijing Hyundai’s survival has not been extinguished. First, in 2021, Beijing Hyundai sold its first factory in Shunyi, Beijing, to Ideal Automobile, easing the problem of excess production capacity. In March 2022, Beijing Hyundai received a capital increase of CNY 6 billion from its two shareholders, demonstrating that both the Korean and Chinese sides have high expectations for Beijing Hyundai.
Another new glimmer of hope shone on Beijing Hyundai in 2022. China’s new energy vehicles continued to make remarkable progress that year. The penetration rate of new energy vehicles has exceeded 30%, and various forms of new energy vehicles, such as pure electric, plug-in hybrid, and extended-range vehicles, have emerged, and hydrogen fuel cell vehicles have entered the industry’s vision with the Winter Olympics. In the future, new energy vehicles will surely be diverse and thriving!
The modern automobile industry has long had an advantage in technological reserves for new energy. Since 1997, Modern Automobile has been researching new energy and has taken the lead in completing a full line layout of power systems in four major new energy fields: FCEV (fuel cell electric vehicle), EV (electric vehicle), HEV (hybrid electric vehicle) and PHEV (plug-in hybrid electric vehicle) worldwide.
Taking NEXO, displayed by Modern Automobile at the CIIE, as an example, as of September 2022, global sales of NEXO have exceeded 30,000 units, making it the best-selling hydrogen fuel cell vehicle in the world.
China has great prospects for the development of new energy vehicles, and Modern Automobile has the best hydrogen fuel cell models. With the upcoming release of the NEXO China version, the brand power of Beijing Hyundai will be greatly enhanced.
If Beijing Hyundai can seize the opportunity of the booming era of new energy vehicles, follow the market trend closely in strategy and product, accelerate product and brand innovation, speed up the localization process of Modern Automobile’s advanced technology, adopt a reasonable product line layout, it will grasp the opportunity to renew itself and achieve rebirth.
According to Beijing Hyundai’s “New Plan Toward 2025” released on the occasion of its 20th anniversary, Beijing Hyundai will achieve a comprehensive transformation of products, brands, and services by 2025.In terms of product strategy, Beijing Hyundai has set three major goals. Firstly, achieve comprehensive hybridization of fuel vehicles by 2025, and within the next 3-5 years, construct a hybrid product matrix consisting of one MPV, two sedans, and three SUVs, with an annual sales target of 300,000 hybrid vehicles. Secondly, accelerate the introduction of Hyundai’s global bestselling pure electric brand, becoming the leader in the joint venture’s pure electric brand. Next year, a dedicated EV model will be launched, and 4-5 pure electric models will be put into production in the next three years, with a target annual sales volume of 200,000 vehicles. Thirdly, achieve OTA technology for all new products by 2025, which allows for unlimited and flow-free remote upgrades of the car system, solving bugs or insufficiencies in a shorter time, saving a lot of manpower and material resources, and bringing a more intelligent and convenient driving experience for users.
In terms of branding strategy, Beijing Hyundai stated that it will interact with young people in a zero-generation gap manner. By listening to and adopting the opinions of young people in various aspects such as car definition, research and development, and dissemination, the brand tagline of “science, sports, and vitality” will be completely renewed.
In terms of service strategy, Beijing Hyundai aims to provide consumers with a comfortable feeling of service. In the field of service innovation, Beijing Hyundai will uphold the service values of “respect and sincerity” and provide young consumers with one-on-one pressure-free online and offline services.
If these goals can be implemented and practiced, Beijing Hyundai will have the opportunity to break the ice and potentially attract the attention of fate, returning to an annual sales volume of 500,000 units.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.