Beijing's modern self-help is still in progress. This time, both Chinese and foreign shareholders will take out a total of 6 billion yuan to re-pave the way for Beijing Hyundai.
Recently, BAIC Motor Co., Ltd. announced that baiqi investment, a subsidiary of the company, and Hyundai Motor signed a modification agreement, and the two sides agreed to jointly increase the capital of the latter by US$942 million (about 6 billion yuan) according to their respective shareholding ratios in Beijing Hyundai. After the completion of the capital increase, the shareholding ratio of the two parties will remain unchanged, and it will still account for 50% each. According to the content of the announcement, the capital increase will be completed in two phases, and before June 30, 2022, both shareholders will pay 50% of the capital increase amount, and the remaining capital increase amount will be paid by December 31, 2022.
Image source: Beijing Hyundai
The capital increase answers two key concerns of the industry. First, does Beijing Hyundai have a future? This substantial capital increase at least shows that both shareholders are still optimistic about the future development of Beijing Hyundai; will the equity ratio of Beijing Hyundai change? Obviously, the news that hyundai group, which has been rumored before, wants to upgrade its equity in Beijing Hyundai can also be temporarily ended. In 2022, the domestic automotive industry officially relaxed the restrictions on the joint venture share ratio, after BMW Brilliance has completed the equity change, and the shareholding structure of Dongfeng Yueda Kia, a "brother" enterprise under the same Hyundai Group, is also being renegotiated (Dongfeng Motor, as one of the major shareholders of the Chinese side, has sold its 25% equity at the end of last year). Beijing Hyundai has been predicted by many insiders that it will be the next car company to make a joint venture share ratio adjustment, and the parties concerned have not responded positively to this before, and the reciprocal capital increase between the shareholders can also be regarded as a formal rebuttal.
But the question is, why choose to increase the capital now?
The answer is simple, that is, the need for development. Beijing Hyundai once had a glorious past, but with the gradual rise of independent car companies, coupled with the attempt to break through its own brand upwards has not been much improved, can only be trapped in the market trap of relying on cost-effective competition can not get out, Beijing Hyundai quickly declined. To make a change, having enough money is a big prerequisite.
The "ancestors" were rich
How long does it take from the mainstream car companies that sell millions of vehicles a year to the frequent news of abandoning the Chinese market? 5 years, this is the answer that belongs to Beijing Hyundai. Five years ago, even the more radical prophets would have associated the word hardship with the future market prospects of Beijing Hyundai. At the time, everything in modern Beijing seemed to be going smoothly.
The hand of time is set back to 5 years ago, when although the overall growth rate of China's car market has slowed down, Beijing Hyundai still shocks the entire market with a dark horse. 2016 is already the fourth consecutive year that Beijing Hyundai has stood in the camp of more than one million vehicles per year, and was the fourth largest car company in domestic sales at that time, and the "modern speed" that was once widely circulated in the industry was a direct affirmation of the achievements of the Beijing hyundai market at that time.
With the continuous record sales performance, Beijing Hyundai has also shown greater market ambitions, two aspects are enough to prove: crazy expansion and seeking brand upwards.
Since 2015, Beijing Hyundai has continued to expand land enclosure production, even if the domestic market has begun to expose the hidden danger of "overcapacity", beijing Hyundai still laid out two new factories in succession in half a year (in April 2015, the construction of the Cangzhou plant in Hebei Province was opened, and the news of the foundation laying of the Chongqing factory was announced in June), the two new factories were planned for an annual production capacity of 300,000 vehicles, plus three factories in Beijing (in 2021, Beijing Hyundai sold a factory in Shunyi, Beijing to the ideal car), Beijing Hyundai directly reserves an annual vehicle production capacity of 1.65 million units. Obviously, for Beijing Hyundai at that time, the annual sales volume ranked fourth, which was not the ultimate goal, and the impact on the championship and runner-up did not look hopeless.
Beijing Hyundai Factory, Image source: Beijing Hyundai
While reserving production capacity, Beijing Hyundai is also making another important attempt - brand upwards, specifically to get rid of the brand image of relying on low-cost paving and reshape the brand value. Beijing Hyundai has thrown out the "D+S" high-end strategy, and successively launched models such as Mingtu, Sonata Nine, and New Tucson, seeking the possibility of upward breakthrough in the two major segments of cars and SUVs.
Unexpected market stalls
It's just that there is a distance between dreams and reality. The huge production capacity of the reserve has become an obstacle to subsequent development, and there has not been much progress in trying to improve the brand image, and in the competition with strong joint venture brands in Europe and the United States, Beijing Hyundai can still focus on cost performance. More critically, Beijing Hyundai has also ushered in new competitors in recent years - independent car companies that have gradually grown up. For many years, the Korean car represented by Beijing Hyundai was a transitional brand between its own brand and a German and Japanese brand, and consumers with relatively limited budgets but unwilling to choose independent cars were the main target groups of Korean cars.
THAAD in 2017 was an important watershed. Many consumers in the terminal market are boycotting Korean cars, and mainstream independent brands with obvious progress have seized this market opportunity and entered a period of rapid growth.
It is undeniable that in terms of system strength, especially the supply chain system, there is still a certain gap between independent car companies and Korean car companies. At present, mainstream independent car companies basically have the ability to develop three major parts and some core components by themselves, but like Korean car companies, there are not many who can have a complete supply chain closed loop. For example, Hyundai Kia Group owns hyundai Mobis, Hyundai Tandis, Hyundai Wia and other world-renowned parts manufacturers, and in the system of independent car companies, there are still few world-class parts companies. However, in addition to the system strength, in terms of brand power and product power, the gap between independent car companies and Korean car companies has not been large, at least in the domestic market, there is no obvious advantage or disadvantage between the two sides. This has directly led to changes in the psychology of end-user car purchases, and in recent years, in the domestic market, it should be rare to hear the statement that Korean cars are more advanced than autonomous.
The gap between product strength and brand power is narrowing, and independent cars are obviously superior in terms of cost performance, and the final result is that in recent years, the market share of Korean cars has continued to shrink, and mainstream independent car companies are constantly refreshing their market records.
After four consecutive years of handing over the highlight data of annual sales of more than one million vehicles, in 2017, beijing hyundai's annual sales fell back to less than one million vehicles, and by 2021, Beijing Hyundai's annual sales were only more than 360,000 vehicles, basically returning to the market level of 10 years ago. The market is not smooth, and the overall revenue situation will certainly not be beautiful. According to the financial report released by Beijing Hyundai, Beijing Hyundai's net loss after tax in 2021 was 4.995 billion yuan, and the net loss in 2020 was 6.284 billion yuan.
In order to survive, change must be sought
The market situation is getting more and more difficult, Beijing Hyundai certainly can not sit still, seeking change is actually what Beijing Hyundai has been doing in recent years, and the intensity is also getting bigger and bigger.
The first is reflected in the reshaping of the brand image. Many people mention Beijing Hyundai, and will always take it for granted that this is a brand that belongs to high cost performance, but from the global performance of Hyundai Kia Group, this is not explained by high cost performance and price reduction. Li Nanhong, director of the Public Relations Department of Beijing Hyundai, has made such an interpretation of the current brand image of Beijing Hyundai, and in the official positioning, what Beijing Hyundai wants to establish at this stage is a new image of high value and high technology.
The direct reaction of the new image in terms of products is that Beijing Hyundai has also begun to take the boutique route. The new cars launched by Beijing Hyundai in the past two or three years, starting from Fiesta, to the new Leader, the new Mingtu, the new Elantra, the new Sonata, the new ix35, the fifth generation Tucson L, the Kustu, etc., can be refreshing in terms of shape and performance. Fiesta had a peak moment of selling more than 10,000 vehicles a month, but after entering 2021, the market performance of this sedan that had been given high hopes was also muted. At present, the new Elantra is the sales of Beijing Hyundai, and in the last three months of last year, the monthly sales of Elantra have exceeded the 10,000 mark.
Secondly, keeping up with the trend of the times, Beijing Hyundai is also fully embracing new energy. In December 2020, Hyundai Kia Group launched the electrification global modular platform E-GMP (Electric-Global Modular Platform), a new car built on this platform, hyundai IONIQ 5, which received 18,000 orders in just one hour of pre-sale in South Korea, breaking the record for pre-sales of Korean car brands in the local area. According to the plan previously announced by Hyundai Motor, by 2030, the Hyundai brand will launch 11 pure electric models, at which time, Hyundai Motor aims to sell 1.87 million electric vehicles (including Hyundai and Genises brands) worldwide.
Hyundai's first mass-produced electric vehicle, IONICQ 5, image source: Beijing Hyundai
China is the world's most dynamic new energy vehicle market, and for any car company, the Chinese market is a top priority to achieve the established global electric vehicle sales target. In the announcement of the shareholders' capital increase issued by BAIC Co., Ltd., it explained the main purpose of the transaction, in addition to strengthening the safety of Beijing Hyundai's capital operation, "more effectively responding to the need for further investment in the subsequent face of the electrification of China's automobile industry" is the most direct reason. In the future, we should be able to look forward to the introduction of more modern electric vehicles, including new cars such as IONIQ 5. In addition to pure electricity, Hyundai Motor is also one of the earliest companies in the world to start laying out the field of hydrogen fuel cells. In the Chinese market, Hyundai Motor is the first overseas automaker to land its hydrogen core business in China, and has invested in Guangzhou to build China's first large-scale hydrogen fuel cell system production plant, "HTWO Guangzhou", and the new plant is expected to be officially completed in the second half of 2022. According to Beijing Hyundai's previous plan, by 2025, Beijing Hyundai's new energy product lineup (including hybrid, plug-in hybrid, electric and hydrogen energy) will be expanded to 38 models.
China's version of the hydrogen fuel cell vehicle NEXO, image source: Beijing Hyundai
Under the background that many foreign brands are seeking to further control the joint venture in China, the equal proportion of capital increase between the shareholders of Beijing Hyundai can be described as a clear stream of the industry. The capital increase without changing the share ratio of the joint venture shows that Chinese and foreign shareholders have the idea of further deepening cooperation, and they are also full of confidence in the subsequent development of the joint venture.
For Beijing Hyundai, which is currently in a difficult period, the support of both shareholders is the premise for completing the transformation of the enterprise, and with a new investment of 6 billion yuan, it is time for Beijing Hyundai to accelerate into the next stage of development.