Using the phrase "a tale of two extremes" to describe the situation of Korean cars seems quite fitting. As the third-largest global automobile manufacturer, their performance in the Chinese market has been declining, reaching a point where they are even selling factories.
According to media reports, Hyundai Motor announced the sale of two factories in China on June 20th, and the process of selling the factories may already be underway. After the sale, Hyundai Motor will be left with only two production plants in China. Additionally, due to a significant drop in sales in the Chinese market over the past six years, Hyundai plans to reduce the number of vehicle models sold in China from the current 13 to 8.
Since its joint venture with BAIC Group in 2002, Beijing Hyundai has experienced rapid development, particularly with its B-segment car, the Sonata. After three years on the market, the Sonata achieved sales of 177,000 units, capturing a 10% market share in its segment. Subsequently, Beijing Hyundai's sales continued to rise, surpassing one million units in 2013 and reaching a peak of 1.14 million units in 2016.
To facilitate further growth, Beijing Hyundai has been expanding its factories. According to available information, Beijing Hyundai has had a total of five factories in China, including the Shunyi Plant 1, Plant 2, Plant 3, Cangzhou Plant in Hebei, and Chongqing Plant, with an annual production capacity of 1.65 million vehicles. However, in recent years, Beijing Hyundai has been downsizing its factories. For example, Plant 1 was previously sold to Li Auto, and now, with the sale of two more factories, Beijing Hyundai will only have two factories remaining in China.
It is worth noting that Beijing Hyundai recently launched a new model, the Musa, with a price of only 121,800 yuan, clearly targeting the domestic car market. However, considering the news of selling factories, it appears that Beijing Hyundai is facing considerable challenges in the domestic automobile market. According to a survey conducted by the Korea Automobile Manufacturers Association in April, Korean cars only hold a 1.6% market share in China. In comparison, in 2012, Korean cars had a market share as high as 10% in China. In the first quarter of 2023, Beijing Hyundai's cumulative sales were only 60,100 units, indicating a significant crisis compared to its previous peak performance.
In theory, Korean cars are considered a good choice for buyers globally, with their attractive design, technology, and competitive pricing. So why is it that Korean cars have repeatedly hit new lows in sales in the Chinese market? The decline in sales of Korean cars cannot be solely attributed to the THAAD incident, as many people have believed. After all, "Rome wasn't built in a day." There are deeper reasons specific to Korean car manufacturers.
Firstly, the brand image of Korean cars is not particularly high. During the initial stage of their development in the Chinese market, Korean cars were primarily associated with affordable models, and their sales were driven by these lower-priced options. As a result, Korean cars have not gained the premium status enjoyed by German and Japanese cars in the eyes of Chinese consumers. The strategy of low pricing, which once worked for Korean cars, is no longer sufficient in the face of intensified market competition. With German and Japanese manufacturers also reducing prices, Korean cars have been squeezed to the limit. After all, most Chinese consumers still trust the quality of German and Japanese brands. At the same time, domestic Chinese automakers have been challenging Korean cars, and currently, Chinese domestic vehicles surpass Korean cars in design, features, technology, and other aspects. It is difficult for Korean cars to find a foothold in such a competitive environment.
Secondly, there is a difference in how Korean cars are treated in various markets. For example, in the North American market, Korean cars can be equipped with mature automatic transmission (AT) systems. However, in many models sold in China, Korean cars often utilize cost-effective continuously variable transmissions (CVT) or dual-clutch transmissions, which has led many people to feel dissatisfied. Chinese consumers have had numerous complaints about dual-clutch transmissions, as they tend to experience issues such as vibration and jerking after prolonged use. Over time, Korean cars have become less competitive in China, standing in stark contrast to their overseas presence.
Furthermore, compared to the global market, China's market has witnessed a faster pace of electrification. As the penetration rate of new energy vehicles continues to increase, the market share of traditional fuel-powered vehicles has been declining. For traditional automakers, the urgency to transition is becoming evident. However, it seems that most traditional automakers have faced challenges in their transition. For instance, Japanese electric vehicles have almost no market share, and German electric vehicles have faced frequent criticisms. Given the weaker brand power of Korean cars, if they were to introduce new energy vehicles in the future, the pressure would be even greater.
In conclusion, Korean cars do possess the capability, as evidenced by their success in global markets. However, each market has its unique demands, and opportunities favor those who are prepared. Korean car manufacturers clearly missed the best timing to build their brand image and achieve a breakthrough. At this point, domestic Chinese brands have emerged as strong contenders, leaving limited space for Korean cars to thrive. It remains uncertain whether the latest model, the Musa, can save Hyundai in this challenging situation.
