Korean cars in China encountered the "darkest hour"?

Reporter Guo Shaodan reported from Beijing

"Is there anyone in the industry who pays attention to Korean cars?" When asked about the current development situation of Korean cars in China, many interviewees will ask this rhetorically.

Indeed, Korean cars are being marginalized at an accelerating rate in the Chinese market. According to the data released by the China Automobile Association, in the first eight months of this year, the market share of Korean cars in China was 2.6%, compared with 3.5% at the end of 2020. The shrinking market share means that the product is not selected and the advantage is not "powerful".

At the beginning of the millennium, with the upgrading of China's consumption power and the blowout of the car market, The Korean car lasted for several years, but with the influx of joint venture brands, the collective sinking of product lines and the comprehensive rise of independent brands, the "cost-effective" advantage of Korean cars has gradually become a thing of the past in China since 2017. In the face of the harsh reality, Korean car companies represented by Hyundai Kia have tried to reshape their brand image. But in the current dazzling environment of products in various auto segments, can Korean cars still go out of the circle?

Deloitte China Automotive Industry Leader Zhou Lingkun said in an interview with the China Business Daily reporter that in 2017, China's auto market entered a structural adjustment, the industry increase shifted from cars to SUVs, from first purchase to consumption upgrades, the independent brand market response is more sensitive, the layout is more rapid and comprehensive, and the SUV dividend is enjoyed earlier. However, Korean car companies have been relatively slow to respond to changes in market demand, and their localization strategies in the Chinese market have deviated, such as not introducing the most advanced technologies and products of their brands, developing models for the localized market, and the existing products are not competitive.

"Endless ups and downs"

Hyundai and Kia are the pillar brands of Korean cars in the Chinese market, both belong to the Korean Hyundai Motor Group, and have established joint ventures with Beijing Motor Group and Dongfeng Group in China, namely Beijing Hyundai and Dongfeng Yueda Kia.

In 2002, the "blowout" of china's auto market was unexpected, and this year, two brother brands, Hyundai and Kia, entered the Chinese market. Beijing Hyundai, a joint venture with BAIC, quickly opened up the market with medium-sized cars as a starting point, and since 2013, sales have increased year after year, driving into the "million era", becoming the fourth largest car company in the Chinese market, creating the buzzword of "modern speed". Dongfeng Yueda Kia has also achieved rapid development with the help of Dongfeng, which is developing rapidly in the Chinese automotive market.

According to the data, Beijing Hyundai and Dongfeng Yueda Kia peaked in 2015 and 2016 respectively, with sales of 1.16 million units and 650,000 vehicles respectively.

Zhong Shi, a senior auto analyst, told reporters that the model "multi-generational same church" is Hyundai Motor's sales strategy that has been adhered to for many years after entering the Chinese market, with this strategy and the "high cost performance" in price and appearance, at that time, the mainstream joint venture brand has not generally sunk, and the independent brand is in a weak market environment, and Beijing Hyundai has rapidly rolled out in the Chinese auto market.

Until 2017, the two brands of Hyundai and Kia both plummeted in the Chinese market.

According to public data, from 2017 to 2020, Beijing Hyundai's sales were 816,000 units, 746,000 units, 703,000 units and 502,000 units, respectively, with a year-on-year decline of 27.8%, 8.6%, 5.7% and 28.7%. Among them, in 2020, all the models on sale of Beijing Hyundai showed a downward trend, of which Fiesta, ix35, Mingtu and Yuena fell by 58.5%, 47.8%, 41% and 25% respectively year-on-year. In the same year, Dongfeng Yueda Kia's sales volume was 359,500 units, 370,000 units, 289,800 units and 249,000 units, respectively, which deteriorated.

Entering 2021, the decline of Hyundai-Kia has further intensified.

According to third-party platform statistics, from January to August 2021, Beijing Hyundai sold 241,000 vehicles, and Dongfeng Kia sold 102,000 vehicles. Hyundai Motor Group has set a sales target of 817,000 vehicles sold in China by 2021, of which 562,000 are Hyundai and 255,000 are Kia. With only 4 months left this year, the remaining sales target was met under extreme pressure.

Hyundai Kia's dilemma directly undermines the momentum of the entire Korean car market in the Chinese market. According to data released by the China Automobile Association, in the first eight months of this year, the market share of Korean cars in China was 2.6%, compared with 3.5% at the end of 2020. The market share of passenger cars is lower, and according to the data of the Association of Passenger Vehicles, from January to August, the market share of Korean cars was 2.3%. Sales totaled approximately 370,000 units, down 16.2% year-on-year.

"In the case of the continuous decline in the price of mainstream Japanese and German car brands, and the comprehensive rise of mainstream independent brands, hyundai Kia's former cost-effective advantages have been eclipsed, and the sales model of multiple generations of the same house has also eaten up the brand power." Over the years, there has been no major breakthrough in the localization level of product strength and brand image, and the living space is naturally getting narrower and narrower. "Zhong Shi analyzed.

Sales have dropped significantly, resulting in a serious overcapacity in Hyundai-Kia's home country.

Among them, Beijing Hyundai has 5 factories in Beijing, Hebei and Chongqing, with an annual production capacity of 1.65 million vehicles, while in 2019, Beijing Hyundai's sales volume was 716,000 vehicles, with a capacity utilization rate of only 43%, and in 2020, the capacity utilization rate was further reduced to 30.42%, and nearly 70% was idle. Since May 2021, Beijing Hyundai has been rumored to be selling the first factory and the second factory.

At the same time, Dongfeng Yueda Kia has a total of 3 factories in China, with an annual production capacity of nearly 900,000 vehicles, and after the sales volume in 2017, the capacity utilization rate is less than 30%, and in recent years, there have been news of factory shutdowns and layoffs. It is also worth noting that the shareholding structure of Dongfeng Yueda Kia may change. Recently, it is reported that in recent years, dongfeng Yueda Kia's sales have been declining, the joint venture company has gradually become a negative asset of Dongfeng Motor, and the three shareholders of Dongfeng Yueda Kia have opened a new round of stock ratio negotiations, and Dongfeng Motor may choose to withdraw.

save oneself

When sales declined in 2017, Wu Zhoutao, then deputy general manager of Beijing Hyundai, said frankly, "In the past few years, we focused on the car sales link, neglecting the brand power improvement, product line layout and rapid response to changes in the Chinese market. This is consistent with the impression of Beijing's modern products being insufficient and the brand strength being weak.

Under pressure, Hyundai-Kia launched a "renaissance" program.

In 2019, Beijing Hyundai officially released the "HSMART+ Strategy" to reshape the new image of "technical strength".

Around this strategy, Beijing Hyundai has made a number of management changes.

In March 2020, Hyundai Motor officially announced the appointment of Xiang Dongping as vice president of Hyundai Motor Group (China), deputy general manager of Beijing Hyundai, and director of sales, mainly responsible for beijing hyundai's marketing sales, marketing network and other businesses, this Chinese local talent with more than 20 years of rich marketing experience, shouldering the heavy responsibility of boosting Beijing Hyundai's sales and enhancing brand image.

During his tenure at Xiang Dongping, Beijing Hyundai has successively launched a number of new cars such as Fiesta Pure Electric, The 10th Generation Sonata, the 7th Generation Elantra, and the new ix35 to show the importance of "2020 is the starting point of Beijing's modern transformation".

But judging from the results, it is not ideal. In 2020, Beijing Hyundai's total sales of 502,000 units fell by more than 28% year-on-year, and the annual target was less than 70% complete.

In early 2021, Xiang Dongping defined this year as the opening year of Beijing Hyundai's strategic transformation in an interview, saying that Hyundai Motor Group had launched a "back to the top" plan to return Hyundai to the main track. The plan has several major adjustments, including detailed planning in terms of branding, market system, dealer profitability, and IT system capabilities.

He has just completed a year of service and left Xiang Dongping in March this year.

Judging from the new models launched in the first half of this year and at the Chengdu Auto Show, Beijing Hyundai has adhered to the strategy of transforming to a technical school, focusing on keywords such as "technology" and "intelligence", and focusing on "technology-driven market and brand promotion". However, judging from the figure of Beijing Hyundai's cumulative sales of 241,000 vehicles in the first eight months of this year, the current market response to Beijing Hyundai's changes has been flat.

The Dongfeng Yueda Kia side has also replaced the top level several times, and the core strategy revolves around getting rid of the low-price hat and upgrading to high-end.

At the beginning of this year, Dongfeng Yueda Kia released a new logo and brand slogan, and launched kia Jawa models at this year's Chengdu Auto Show, priced at more than 280,000 yuan, in order to convey a message to the outside world: say goodbye to the "low price" strategy.

"For Kia, losing price competitiveness is a very risky thing." Liu Changsheng, general manager of Dongfeng Yueda Kia, said in an interview that the pricing of Jiahua is indeed a price band that Dongfeng Yueda Kia has never touched. Dongfeng Yueda Kia is in the process of rebranding, will abandon the past cost-effective route, with Jawa as the opening of Kia brand high-end.

Where is the way out?

"In fact, with the current tactical playing style of Korean cars, it is difficult to make a difference in the Chinese market." In the view of many industry interviewees, today's global car companies are surging to electrification and intelligent transformation, especially the comprehensive rise of leading independent brands in electric intelligence, in contrast, The Korean car product force is lagging behind.

In response to the recent product lines launched by Korean car companies, Zhong Shi said that after the market share fell sharply, only the change of models or categories had little effect on increasing market sales. At present, a variety of marketing concepts in the Chinese market has no freshness, the product must have a special new highlights and buying points to have the opportunity to go out of the circle, on the basis of enhancing product power, and then talk about brand power.

The current decline has made the industry worry about whether there is a future for Korean cars in the Chinese market.

In this regard, Zhou Lingkun believes that Korean car companies should seize the dividend period of new energy vehicles and intelligent networking at the strategic level, and establish medium- and long-term strategic planning and diversified platforms and model introductions, and support the entire ecosystem through supporting user experience, marketing system and service system. At the same time, we will increase investment in localized research and development and quickly adapt to the huge changes in the needs of Chinese consumers.

"Korean car companies need to 'change their minds' and carry out complete changes from top to bottom." Feng Shiming, a senior automotive analyst, told reporters that it is necessary to bypass innovation on the basis of the original, take China, the world's largest automobile market, as the entry point, and establish a new brand, such as for young users, to create a new brand of electrification and intelligence for the future, and even to break the link with the existing car-making concept and system.

"In fact, Korean cars are good in appearance design and hardware capabilities, but there is still a lot of room for improvement in software, and in the face of the wave of software redefining cars in the future, improving software capabilities is to seize the opportunity of changing the times to improve core competitiveness." Feng Shiming thinks.