Features
8 Dec 19

Aggressive EV and Fuel Cell strategy at Hyundai

The Korean automaker is gradually releasing bits and pieces of its strategy to media and market; the “Strategy 2025 Roadmap”, as Hyundai calls it, includes a couple of dramatic shifts compared its previous strategy, which was focused essentially on the local Korean market and US and China as foreign markets.

GlobalFleet has reported recently (click to see article) Hyundai’s massive investment in a production plant in Indonesia, alongside the cancellation of 2 planned factories in China. Indonesia makes total sense to target the fast-growing South-East Asian market, but also makes a lot of sense for another reason: the country holds 25% of the global nickel reserves and has issued a ban nickel export. In other words, companies who want to get hold of Indonesia’s nickel, will need to invest locally.

Operating margin ambitions

Hyundai is performing on the lower end of OEM operating margins. At 2.5%, it’s underperforming compared to its highly profitable Asian competitor Toyota (8.2%) and even more when comparing to BMW (9.3%). Most OEMs achieve 2% to 6%.

The Koreans want to reach 8% operating margin by 2025 and are ready to spend almost USD 52 billion to achieve this.

Strategy

The new roadmap includes investments in electric, fuel cell, autonomous, flying taxis and mobility services. Most of its models (including the Genesis high-end brand and the high-performance Hyundai N brand) will be electrified by 2030. Hyundai anticipates selling 560.000 full electric vehicles and 110.000 fuel cell vehicles in key markets first (Korea, Europe, US and China), followed by high-volume growth markets such as India and Brazil.

Smart Mobility

In addition to its core activities, Hyundai will be developing mobility services. The strategy is to offer different solutions in function of geographical requirements; in the US, for example, the focus will be on robotaxis and autonomous sharing, whereas Hyundai will be partnering with local mobility suppliers in Asia. In addition, Hyundai will be accelerating the development of flying cars, robotics and autonomous last-mile mobility.

Overhaul

Progress comes at a cost; Hyundai will be stripping USD 23 billion of its expenditures before 2023 and aims to cut the cost of raw materials by USD 30 billion through 2022. The car industry is shrinking and OEMs across the world have announced reductions in work force (Bloomberg: 80.000 jobs to be cut in the next few years). Hyundai’s strategy makes sense, but it will be a challenge nonetheless to make the figures work.

Authored by: Yves Helven