The South Korean carmaker Hiundai has been experiencing tough times lately. The company suffers from a lack of customers and the lack of larger, cheaper SUVs, writes Reuters.
Hiundai's problems are the most obvious in the world's largest car market – in China. Despite big investments and more attractive offers, the company's sales are not working, even in the big city of Chongqing, the Korean manufacturer made only twelve cars per month.
Japanese competitor Nissan sells four times more. "Sales are very weak, Nissan has dozens of customers while we only have two," complains to manager Liu, who manages the Hiundai sales outlet in the city.
An hour's drive from Chongqing is Hiundai's $ 1 billion production facility, which last year opened with the idea of producing 300,000 cars a year.
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But due to weak sales and a sharp slowdown in the Chinese automotive market, the factory only works at about 30% capacity, reports Reuters.
The company refuses to comment on its production and sales in China, but assures it "works closely" with BAIC's local partner to make his business profitable in the country.
Hiundai hits mean a major change for a car maker that previously enjoyed great success in China because it quickly delivered and sold its popular new and cheap models in the growing market.
In 2009, Hiundai and its partner Kia were the third in the country after General Motors and Volkswagen. They are now in 9th place, and their market share last year dropped to 4% with more than 10% at the beginning of the decade.
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The Korean company lost its attractiveness for cheaper models at the expense of Chinese competitors Geelia and BID. Foreign companies maintain competitive prices for mass market models, limiting the role of Hiundai as an affordable foreign brand.
The second largest world car market – the US, the market share of Hiundaia last year dropped to 4%, the lowest level since almost 10 years.
The company's problems in the US and China are similar: they have missed changes in the taste of consumers, especially the growing demand for SUVs and higher prices than recommended by reputations, industry experts say.
The car maker was convinced that it is trying to solve problems in two key markets by redesigning designs, launching new SUVs, and providing regional autonomy units for the development of faster products tailored to local tastes.
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Last month, Hiundai dropped its 68% net profit in the third quarter and said its January-September margin declined to 2.7%. In 2011, the operating profit of a Korean company of 10.3% was the highest in the industry, giving up only the German BMV.
A negative impact is also the lack of a strong series of key markets for Hiudai. Compared to 76% for GM and 63% for industrial average, the dominant models accounted for only 36% of Hiundaia sales in the US, according to Autodata Corp.
The Korean company's leadership continues to be heavily dependent on limousines and ignores the advice of US multi-pickup and SUVs. The manufacturer is "caught a little unprepared" by the rapid change in the market in larger vehicles, acknowledges the chief operating officer of Hiundai America Brian Smith.
But the number of new SUVs, including a pick-up that will be available from 2020, will help "slow and stable" sales recovery, Smith said in an interview with Reuters.
In recent years, Hiundai has hired several new designers working on a brand new design of future models. The company will take several years to return to success and record its market share in 2011, Smith acknowledges.
The new SUV Encino also does not enjoy much success in China. "We do not sell Encino, it just does not fit into the Chinese market, most Chinese people prefer more, cheaper and better cars," said the second chief of Hiundai in Chongqing.
Instead of 60,000 units planned by the company annually, the model sold slightly more than 6,000 units during the first 6 months of commissioning.
If it wants to return in good time, the company must seriously increase its investment in research and development, which is currently significantly less than its competitors.
Hiundai needs to re-examine its ambitions in the premium segment, where it is not so successful. According to experts, the image of the brand has certainly grown, but it is still "not at all close to the top brand".
"They have to return to their previous strategy and maintain competitive prices in order to keep production," said Nick Riley, former GM GM, South Korea.