In Spite of Economy, Hyundai Steadily Gains on Japanese Rivals

If you’re an executive at a Japanese automaker, the word “Hyundai” likely sends your pulse racing and twists your stomach into knots. Despite the industry-wide slump, Hyundai has remained profitable and is steadily increasing its market share.

Through the first half of the year, Hyundai -- together with Kia -- overtook Ford as the world’s fourth-largest automaker. Additionally, the company has remained profitable, putting pressure on Japanese auto executives who see Hyundai and Kia as rivals in key markets. Hyundai set a record quarterly profit of $847 million during the third quarter this year, equaling the combined profits of both Toyota and Honda.

Things will only improve for the South Korean automaker, as its native country recently signed a tentative trade agreement with the European Union. If approved, the agreement will allow South Korean goods to be freely traded with an additional 40 countries. Japan, on the other hand, has less than one-third as many FTAs in place, and most of them are with countries within Asia.

If that’s not enough to contend with, Hyundai is prospering from a weak Korean won, while Japan’s strong yen value is reducing profit margins on exported vehicles. Some Japanese auto executives have encouraged government policies to help lower the yen’s value, but the newly elected Japanese government has been somewhat indifferent to the situation.

“I think there’s a sense of crisis in the whole [Japanese] industry,” said Toshiyuki Shiga, COO of Nissan, speaking about South Korean automakers’ growing clout. “Whether you take the FTAs or foreign-exchange policy, I get the impression that South Korea is tackling things well.”

However, some say the optimism over Hyundai is premature, seeing as Japan’s top brands have more global reach, flexibility, and experience in building cars abroad. Part of this can be seen in the Japanese companies’ quick reaction to the rising yen. They cut production of exported products dramatically and increased production at overseas facilities (Nissan actually transferred production of one of its vehicles to a foreign factory for exportation to its home market of Japan).

“There’s no comparison,” said Diane Lin, a portfolio manager at Pengana Capital in Australia. “If you compare apple to apple, fundamentally, Hyundai still has a far, far, way to go [in flexibility]”

Regardless, there’s no denying Hyundai has transformed itself into a strong, global competitor in a very short period of time. The company has made some incredible gains in the past decade, and seeing as it shows no signs of slowing down, we expect it even more incredible accomplishments in the years to come.

Source: Automotive News

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