Reasons for Slow Sales
Industry experts said that Hyundai Motor and its affiliate Kia Motors recently saw their sales decrease in China due to the fact that they failed to respond to the rapidly changing Chinese market more quickly and had a low price competitiveness, rather than the Chinese government's economic retaliation against South Korea over the deployment of a U.S. Terminal High Altitude Area Defense (THAAD).
The biggest culprit of their sluggish sales is the decrease in the SUV market competitiveness. Although the Chinese car market is growing based on sport utility vehicles (SUVs) and multi-purpose vehicles (MPVs), Hyundai-Kia Motors have failed to take the leadership in the market due to a shortage of product lineups and lower price competitiveness. In fact, Hyundai Motor have recorded poor sales this year, driven by the rapid drop in its SUV sales.
According to Hyundai Motor on April 13, the combined sales of four SUV models currently on sale in China – the ix25, Tucson LM and TL and Santa Fe DM – decreased from 23,989 in January to 19,209 in February and 12,504 in March. On the other hand, the sales of its sedan models, such as the Verna, Elantra and Sonta, increased by 3,000 units from 40,867 in February to 43,522 in March when the Chinese government escalated the retaliation over the THAAD deployment, boosted by the release of the new Elantra ID. It means that the competitiveness of car model has a greater influence on sales than the THAAD.
The Chinese SUV market, which grew about 45 percent last year, is expected to show high growth this year as well. Accordingly, GM and Volkswagen are scrambling to expand their SUV lineups. GM, which owns brands like Buick, Chevrolet and Cadillac, has various MPV models as well as 10 SUV models.
In particular, Chinese automakers are aggressively targeting the market. Great Wall Motor and Changan Automobile have SUV brands and sell cost-effective SUVs at 60,000 to 90,000 yuan (9.9 million to 150 million won) which is half the price of Hyundai Motor. Chinese car makers armed with SUV and compact car models had a 45 percent share in the Chinese market last year. Some said that Hyundai Motor and Kia Motors, which are popular brands, have an uncertain market position as the Chinese market is bisected into high-end and low-end cars depending on the economic status. GM and Volkswagen are also caught in the middle but they are dominating the market with their long experiences, expertise and wide variety of lineups.
An expert in the car industry said, “There are two factors that decrease Hyundai-Kia Motors’ market share in China. The two companies failed to launch car models that consumers and dealers want and to catch up with changes in the Chinese market, including rapid growth of local makers. Foreign car brands sell well in the eastern region in China, like Shanghai and Beijing. However, low-priced SUVs produced by Chinese automakers are popular in the central western part due to a low economic level.”
An official from the industry also said, “When the Chinese market was growing, Hyundai-Kia Motors was also growing together. But, the situations have changed tremendously as the market is in bad shape. The group needs to strengthen its low-end car lineups.”