Hyundai Motor expects to beat its 2011 global sales target as the European debt crisis and global economic uncertainty create an opportunity for the Korean automaker’s lower cost models to pick up market share.
But Hyundai, which posted more than 10 per cent in annual sales growth for the past two years, expects to see growth softening next year due to capacity constraints, William Y.W. Lee, executive vice president and head of Hyundai Motor’s Overseas Sales Division, told Reuters in an interview on Thursday.Hyundai has “high expectations” it will post global sales of 4 million vehicles this year, versus its previous target of 3.9 million, Lee said.
“Crisis can be an opportunity for Hyundai. The crisis can bring changes to the market dynamics as the consumer has a stronger desire for value,” said Lee.
For much of the early part of its 44-year history, Hyundai Motor was seen as a maker of cheap, low-quality vehicles. Its first car, the Pony, was made with a design from Italy and borrowed engine, suspension and transmission technology from Japan’s Mitsubishi Motors.
Hyundai’s earlier poor quality was a target of media ridicule. The BBC’s popular “Top Gear” show once suggested Hyundai’s Accent subcompact should be renamed the “Hyundai Accident” and said it was worse than a cheap lunch.
But Hyundai has emerged as one of the biggest threats to global automakers in recent years, increasing sales and gaining market share during the global financial crisis.
Hyundai and affiliate Kia Motors, together the world’s No.5 automaker by sales in 2010, have been catching up on the likes of Toyota Motors on quality over the past decade.Much of the credit for that has gone to chairman Chung Mong-koo, an iron-fist leader who has focused on raising standards and built a disciplined, military-like culture at the company.
Models such as the Elantra and Sonata, whose features and styling have won over cost-conscious buyers, have taken market share from the likes of Toyota’s Camry and Honda Motor’s Civic in the key US market, while growth in emerging markets such as India and China has also been strong.
But Hyundai’s sales growth is seen easing this year because of its stretched capacity.
Lee reiterated Hyundai had no plans to expand production facilities.
“Indeed, crisis is an opportunity for Hyundai and will do more good for them than harm, as people will stay with more affordable brands rather than switching to luxury cars,” said
Jung Kyun-sik, a fund manager at Eugene Asset Management.
Jung argued Hyundai should focus on building margins and avoid costly battles for volume and market share, but not everyone agrees.
“Qualitative growth has its limits, and Hyundai should restart its growth engines again,” said Park In-woo, an analyst at LIG Investment & Securities.
Lee said he hoped to accelerate Europe sales next year by 20 per cent to 480,000 vehicles, including 110,000 of its new i30 compact model, though he added that the targets were not final.The company plans to unveil a successor to the i30 compact, its best-selling model in Europe, at the upcoming Frankfurt Motor Show. Hyundai has rolled out the i40 model, which is tailored to the European market, in September.
The South Korean car maker is on track to boost its total vehicle sales in Europe by about 10 per cent to 400,000 units this year despite the market’s expected dip, after outperforming with a 7.4 per cent rise in sales last year, Lee said.Hyundai plans to reach full capacity at its Czech plant of 300,000 cars per year in the autumn, which produced 200,135 vehicles in 2010. Hyundai’s market share in Europe was only 2.6 per cent last year, compared with its 4.6 per cent share in the United States, 6.3 per cent share in China and 19.7 per cent share in India.“We have been weak in the European fleet market, which accounts for around half of the market. We will expand our fleet sales, which will play a big role in helping us achieve a 5 per cent market share in Europe for the long term,” he said.