An End to Localization Strategy
Hyundai Motor Group has decided to withdraw about 30 resident officials from China, the world's largest automobile market, and carry out a reorganization of its operations in China. Analysts say that the automotive group has virtually given up its localization strategy in China.
The withdrawing officials are manager-level Korean employees in charge of production and sales in China.
The move is seen as a step toward ending the localization strategy pursued by Hyundai Motor Group. To overcome sluggish sales in China, the group reorganized its Chinese subsidiary in 2019, allowing it to run independently in terms of organization and personnel management. In October of the same year, it appointed Lee Kwang-guk, who led a sales increase in Korea, to head up the Chinese subsidiary.
Most foreign automakers in China run 50:50 joint ventures with local companies and pursue a localization strategy. They allow their Chinese subsidiaries to make decisions about product development and sales. Hyundai Motor also followed this strategy. Furthermore, Kia Corp. appointed a Chinese national as CEO of its Chinese corporation.
However, sales in China have shown no signs of recovery over the past two years. In 2020, Hyundai Motor Co. and Kia Corp. were not included in the top 15 automakers in China for the first time. Hyundai Motor's factory operation rate in China is only 33 percent.
The tide has not turned in 2021. According to the China Passenger Car Association (CPCA), Hyundai Motor sold 31,000 cars in China in July, down 16 percent from the same period of 2020. Its market share fell 0.2 percentage points to 2.1 percent. Kia Corp. saw its retail sales in China fall 40 percent to 12,000 units in July. Its market share fell 0.5 percentage points to 0.8 percent, eventually hitting the 0 percent range.
The reorganization is seen as signaling the reduction of Hyundai Motor and Kia's Chinese businesses. Complaints are growing among their dealers in China.