The decline in sales of Korean cars in China did not happen overnight, but was the result of interlocking links.
Author Tetsu |
Edit | Wen Liang
The most brilliant days of Korean cars in China are still stuck in 2016.
In 1990, taking the 11th Beijing Asian Games as an opportunity, Hyundai, Kia, Daewoo and other Korean cars tried to push open the door of the Chinese market, and before and after China's accession to the World Trade Organization in 2002, SsangYong, Kia and Hyundai officially entered the Chinese market.
In just over a decade, Korean cars gradually overtook the German and Japanese car brands and ushered in a period of highlights in the Chinese market:
In 2013, China surpassed South Korea for the first time and became the largest exporter of Hyundai and Kia's cars; in 2016, Hyundai's sales in the Chinese market exceeded one million units for four consecutive years, and Kia's car sales in China exceeded 600,000 for the first time.
However, the good times did not last long, and when the time came to 2017, the sales of Hyundai and Kia, the only remaining car brands in South Korea, fell sharply in China.
According to data released by the China Passenger Car Market Information Association, Hyundai and Kia's cumulative sales in the Chinese market in 2021 were 385,000 units and 163,400 units, respectively, and their car sales have been declining for five consecutive years, with the combined Chinese market share of the two major brands being less than 2%.
Twenty years after entering China, Korean cars seem to have ushered in the darkest moment. It should be noted that in the case that the joint venture brand still has certain advantages, why is the sales volume of Korean cars alone declining year after year? Under the attack of China's own brands and foreign brands such as Germany, Japan and the United States, can Korean car brands still raise their heads in the Chinese market? These are all questions worth exploring.
The "sales-only" Korean automobile has entered the trough of the Chinese market
There are many opinions about the reasons why Korean cars are cold in the Chinese market, and some people attribute it mainly to the policy friction between China and South Korea in 2016.
Although this statement has a certain basis, it should be noted that after 2016, it is indeed a watershed in the sales of Korean cars in China, but before that, its market share has declined year by year, and it has begun to decline.
In 2011, Hyundai and Kia's Market Share in China rose to 10.4%, the highest market share since it entered China. But four years later, that number fell to 8.1 percent, the slowest market share since 2010.
At the same time, Hyundai and Kia's market sales have also declined accordingly. In July 2015, Hyundai and Kia's sales in China both fell by more than 30% year-on-year. In response to this situation, Hyundai Group quickly replaced all three senior executives who managed the China business.
Therefore, the reason for the decline in sales and share of Korean automobiles in the Chinese market cannot be attributed to a single event alone. To some extent, Korean cars have made remarkable achievements in the Chinese market, the large reason is that they have grabbed market dividends, and when the market dividends disappear, the development opportunities of Korean cars are relatively reduced.
For a long time in the past, China's automobile industry was relatively underdeveloped, and the overall technical level was low, and at this time, the more mature Korean automobiles in China focused on low-cost product strategies and seized a lot of market space. For example, in the early 20th century, most of the brands used in Beijing taxis were Korean cars.
(Modern Elantra)
Relying on the low-price advantage to win, on the one hand, brings huge benefits to Korean automobiles, on the other hand, it relies too much on the low-price strategy to ignore the promotion of brand image, and lays hidden dangers for its future.
After years of development, the technology of China's independent and joint venture brands has gradually improved, and its overall level has been enough to compete with Korean cars, and the cost-effective advantage of Korean cars is no longer prominent. In addition, due to the long-term "price for volume" strategy, Hyundai Kia has not exported its high-end models to China, and the long-term export of cheaper products to China has also made Korean cars gradually labeled as low-end brands. In the case of the small difference in the brand image of Chinese and Korean cars, but the higher price of Korean cars, Chinese consumers obviously have more room for brand choice.
After declining sales, Hyundai tried to regain market share at lower product prices, but the move further led to a long-term stalemate in its brand image at the low end.
In addition to the disappearance of price advantages, Korean car brands lack insight into Chinese consumer preferences, which also makes them miss new growth opportunities.
In 2012, Hyundai Motor Group publicly stated to the media that the Chinese market has become its largest global market and is enough to affect the future development of its company. However, its substantive action does not reflect the importance that Korean automobiles attach to the Chinese consumer market.
Chinese consumers' preference for electric, SUVs and luxury brand models began to become apparent after 2010, but Hyundai Motor has only stepped up its layout in recent years for these aspects.
In terms of electrification, Hyundai Motor Group will release its first pure electric brand in 2020 and its first pure electric vehicle in 2021. China's independent automobile brands, represented by BYD, have entered the pure electric vehicle market in 2009.
In terms of SUVs and luxury brands, the movement of Korean cars is also one step slower. Hyundai Motor's 2019 annual report proposes to develop medium and large SUVs and luxury car brands "Genises" as "high value-added cars", and plans to increase the proportion of sales of this type of car by more than 30% in the next five years. At this time, a variety of brand SUV models have appeared in the Chinese auto market.
The lack of core competitiveness of the brand and the lack of the latest product trends have led to a year-on-year decline in sales of Korean cars in China.
In 2014, Hyundai Motor Group's vehicle sales in China were six times that of Geely Motors, while from January to November 2017, Hyundai Kia's sales totaled 970,000 units, and Geely Automobile's sales rose to 1.08 million units.
In the case of the loss of sales and share in the Chinese market, the interior of Korean automobiles began to adjust frequently to try to remedy.
South Korea's Chosun Ilbo once counted that in the 20 years since the establishment of Beijing Hyundai, 8 South Korean leaders have been replaced, of which 7 have a maximum tenure of no more than one year and four months.
The frequent replacement of core executives in China makes it difficult for management to have a deep understanding of the Chinese auto market, which is not conducive to the accurate and long-term implementation of management decisions.
The continuous decline in sales of Korean automobiles in China is not achieved overnight, but is the result of a number of adjustments under the imbalance of its product structure.
"In the past few years, our focus has been on selling cars, neglecting the improvement of brand power, the layout of product lines and the rapid response to changes in the Chinese consumer market." As for the reasons for the sharp decline in sales in 2017, Wu Zhoutao, then deputy general manager of Beijing Hyundai and head of the copy department of the sales headquarters, once summed it up.
In the era of smart cars, do Korean cars still have a chance in China?
Today, the market share of Korean cars in China has receded to the level of a decade ago. Or aware of this situation, in 2021, Hyundai Motor Group announced a complete change in the Chinese market strategy.
According to its plan, Hyundai Motor Group will launch pure electric customized models for the Chinese market, introduce high-end brand Jenisses, optimize the dealer distribution system and start online sales.
in Geniseith
Regardless of whether this market strategy is beneficial to increase its sales, can Korean cars usher in new rising opportunities in the Chinese market, where the trend of smart cars is becoming more and more obvious?
Smart cars require technologies such as advanced sensor devices, autonomous driving or smart cockpits, which Hyundai Motor Group has accumulated before.
In terms of autonomous driving, Hyundai Motor Group jointly developed autonomous driving technology with Aurora Innovation in 2018, and formed a joint venture with Aptiv to develop driverless technology systems and mass production platforms.
During the 2018 PyeongChang Winter Olympics, Hyundai L4 self-driving cars successfully completed a high-speed driverless vehicle of 188 kilometers. It expects to commercialize L5 level 5 fully autonomous driving technology by 2030.
In terms of smart cockpits, Hyundai Motor Group laid out earlier. In 2014, Hyundai Motor Group has developed and applied with Baidu on the Internet of Vehicles such as smartphone interconnection, smartphone navigation, voice recognition and other Internet of Vehicle functions, and jointly studied the Internet of Vehicles technology with NVIDIA.
In 2020, Hyundai Motor Kia cooperated with Baidu Apollo, and the two have since successfully developed a smart cockpit product, Dongfeng Yueda Kia Smart Run Ace.
In order to increase its market share in China, Hyundai Motor Group will establish a forward-looking digital intelligent R&D center in Shanghai in 2021, focusing on the development of related technologies such as mobility, electrification, connected technology and autonomous driving.
(Hyundai Motor China Forward-looking Digital Intelligence R&D Center was established in Shanghai)
Thanks to its active multi-party cooperation, Hyundai Motor Group has accumulated technologies such as driver assistance systems, L4 level autonomous driving, automatic parking, and window displays in the field of vehicle intelligence.
The relevant person in charge of Hyundai Motor has said that it will take at least three years to rebuild the brand, and it is expected to achieve considerable results in 2022.
On the other hand, however, whether Hyundai and Kia, which are gradually fading out of China's mainstream models, can achieve results under the guidance of the new China market strategy is still a question mark.
On the one hand, today's Chinese auto market is far from a decade ago, and has entered a period of high competition.
The new car-making forces carry unique technologies and services, and have gradually gained a place under the siege of traditional car companies. The trend of intelligent cars set off by new car manufacturers led by Tesla has prompted traditional Chinese car companies to accelerate the development of smart cars, and the competition in China's auto market has intensified.
On the other hand, Korean cars have less intelligent layout and are difficult to compete with Local Chinese car companies.
Although Korean cars have accumulated in terms of intelligence, they do not seem to have launched related models at present, while Chinese local car companies have launched a number of mass-produced smart cars. In addition, affected by the Internet thinking that pays attention to user operation, many Chinese car companies have accumulated a group of firm fans through various brand activities, and the brand building of Korean automobiles in the Chinese market was insufficient, and it was difficult to grab users by products alone.
Therefore, even if Korean automobiles actively adjust their market strategies for the Chinese market, there are many challenges in reversing the decline.
Different market strategies, different outcome directions
Contrary to China's precarious market share, Korean automobiles have achieved breakthrough results in sales in many parts of the world in recent years.
In 2021, Hyundai Kia's U.S. sales surpassed Honda's fifth place for the first time, with sales up 23.3% and 19.7% respectively over 2020. In the European market, Hyundai Kia's sales volume increased by more than 20% year-on-year, and the market share exceeded 8% for the first time.
In fact, in 2021, Hyundai and Kia car sales will only decline in China and South Korea, and sales in other markets will achieve great growth. The reason for this is related to the reduction in production of U.S. automobiles due to the decline in market demand expectations under the epidemic, and Hyundai-Kia's maintenance of normal production, and it is also closely related to its past market strategy.
For the European and American markets, Hyundai Group adopts a market strategy that is different from that of China.
First of all, Hyundai Group pays attention to brand building in the European and American markets.
After the 2009 financial crisis, Hyundai Motor launched a special "unemployment protection plan" for a large number of unemployed people in the United States. The program allows instalment consumers to return the new car and terminate the instalment payment within 3-12 months of the purchase of the car if they are unemployed, bankrupt or have their driver's license revoked for medical reasons.
(Hyundai Motor "Unemployment Insurance Plan" publicity photo)
The plan paid off significantly, and a month after its release, Hyundai's medium- and large-sized car sales increased by 85.5% year-on-year, making it one of the three car companies that increased sales in the month.
Since then, Hyundai Motor Group has actively participated in the sponsorship of large-scale events in the United States, and it has repeatedly placed advertisements in the "American Spring Festival Gala" Super Bowl, and sponsored golf and other national popular events in the United States. In the European market, Hyundai Motor has also sponsored football events such as the European Cup and the World Cup.
As for the Chinese market, Hyundai Kia lost to Volkswagen and GM in the competition for sponsors of the Beijing Olympic Games and the Shanghai World Expo.
Second, Hyundai Group is more sensitive to the needs of European and American consumers.
For the Sino-US market, Korean automobiles have mainly promoted small models represented by cars to seize the market in the early stage of the market, and this strategy has brought it a certain market share. But after 2010, when Chinese and American consumers began to prefer medium and large models such as SUVs, Korean cars had different strategies.
For Chinese consumers, Hyundai is still pushing for a sedan, only to reduce the price, while for American consumers, Hyundai motor will launch a new SUV model as soon as possible.
In the European market, Hyundai Motor has established an integrated network including automobile production, sales and service, and launched customized models and sales strategies for European consumers. For the Chinese market, Hyundai and Kia have long insisted on introducing the original models.
Hyundai Group's sales in many markets around the world have increased significantly, reflecting the certain technical strength of its products, but only the sales volume in the Chinese market has declined year after year, reflecting that its Chinese market strategy does need to be adjusted.
The final hole card
The Chinese market was once a golden egg for Korean cars.
In 2014, Hyundai Group sold 1,115,000 vehicles in China, 13,000 more than the Combined sales in South Korea and Europe. From 2002 to 2020, Hyundai Group's cumulative net profit in the Chinese market was 9.55 trillion won (about 50.2 billion yuan).
Today, Hyundai Motor Group has introduced luxury car brands and hydrogen energy car brands NEXO, while focusing on smart technology, and seems to be trying to gain market share and increase product sales by creating high-end product routes.
At present, Korean cars have been embarrassed, some of its factories in China have been sold, and Chinese partners have withdrawn their shares. In this context, it is still a question mark whether the high-end brands and hydrogen energy vehicles that Hyundai Motor Group is trying to promote in today's Chinese market can help it change its fate.
If it is still difficult to please Chinese consumers after handing over the only bottom card, where will Korean cars go in China?
END
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