Bruised by anti-South Korean sentiment in its biggest market and losing ground to local automakers, Hyundai Motor Co is to open its first Chinese brand store, and might locally assemble its premium Genesis cars and accelerate the launch of a sport-utility vehicle (SUV), people familiar with the plans said.
The measures are aimed at rebooting the South Korean firm’s branding in China, where many see Hyundai as a lower-end maker of city taxis.
Hyundai and its affiliate Kia Motors Corp were not long ago ranked third among foreign car brands in China, but sales have been hit by a consumer backlash over South Korea’s deployment of the US-implemented anti-missile Terminal High Altitude Area Defense system, which Beijing opposes.
Analysts say the diplomatic row masks broader problems for Hyundai/Kia in China: poor brand recognition and a model line-up struggling against local brands’ cheaper SUVs.
“Hyundai has an in-between brand that doesn’t have a clear identity in China, and there’s the backdrop of poor China-Korea relations,” said James Chao (趙英智), Shanghai-based Asia-Pacific chief of consulting firm IHS Markit Automotive. “Newly introduced SUVs should help, but they are late to the game.”
Even before the missile systems row, Hyundai/Kia’s China market share tumbled to 8.1 percent last year, the lowest in eight years, while this year, it has slid further to 5 percent.
To help its identity crisis, Hyundai in September is to open a brand “experience” center in Beijing’s 798 Art District, a trendy hub of refurbished factory buildings. Hyundai has three similar centers in Seoul and one in Moscow.
“We’re not going to show a real car. This space is only for focusing on brand-building,” said Xu Jing, the Hyundai executive in charge of the project.
The center was planned before the political tensions, but its completion is now a key plank in Hyundai’s efforts to regain a lost position in China as local automakers and European brands gain ground.
Volvo-owner Geely Holding Group (吉利控股集團) and Great Wall Motor Co (長城汽車) are also looking to move upmarket.
The branding store ventures into territory traditionally held by premium names such as Daimler AG’s “Mercedes me” stores and BMW AG’s brand centers, already in China.
Hyundai is also considering using complete knock-down kits shipped from South Korea to assemble Genesis cars in China — more than halving import tariffs to 10 percent — two people familiar with the matter said.
Building Genesis cars from kits in China would also prevent technology leaking to its local joint venture partner, BAIC Automotive Group (北京汽車), one of the people added.
The kits are a first step, one Hyundai insider said.
“We are agonizing over how to source local parts and secure enough sales to build the Genesis cars,” they said.
Hyundai launched its Genesis luxury sedan in 2008, and two years ago spun it off with the larger Equus sedan into a standalone premium brand.
The company has not decided which Genesis model it is to build in China first, but plans to have six models, including a sports sedan and two SUVs, under the premium marque by 2020.
“While the Genesis brand is reviewing a variety of strategies for the China market, no specific decisions have been made yet,” Hyundai said in a statement.
Hyundai sold 74 Genesis sedans in China last year, down from 1,016 in 2015. It sold a single Equus, down from 10 the previous year, according to export data.
Hyundai might also move forward the launch of a small SUV, codenamed NU, to be built at its fourth factory in China, by a month to November, one of the people said.
Kia is also considering launching the Stinger, its first sports sedan, in China, people with direct knowledge of the matter said, although there are no plans to build the model there.
Hyundai said it also plans to apply new, cutting-edge technologies such as connectivity and advanced driver assistance systems to many products from the second half of this year, and to introduce six new-energy vehicles soon.
Since starting to make cars in China in 2002, Hyundai has aggressively chased sales and market share by selling both older and new versions of models including the Elantra and Sonata sedans and the Tucson SUV.
Among foreign car brands, Hyundai’s China sales lag behind only those of General Motors Co and Volkswagen AG, but it is generally seen as more lower-end than US, German and Japanese rivals.
Beijing Hyundai has supplied about one-fifth of the capital’s taxis.
The volume sales model “did wonders for sales growth, but dented the Hyundai image in the minds of Chinese buyers,” consultancy Dunne Automotive president Michael Dunne said.
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