Hyundai, now in 2024 is the world’s third largest automaker in the world by production volume just behind Toyota and Volkswagen.
Hyundai Motor Group, which includes Kia and luxury car brand Genesis, has sold more than 7 Million cars in 2023, whereas Toyota and Volkswagen group has sold more than 10 Million+ and 9 Million+ cars respectively.
But this wasn’t always the case and in late 1990’s and in early 2000’s, Hyundai sales hit rock bottom and the situation was so bad that it was to go bankrupt.
And if we zoom out a little more, Hyundai wasn’t even a car company when it was founded by Chung Ju-yung back in 1947 but just a small construction company back in South Korea and today it is one of the biggest car company in the world, working on ambitious projects like Robo-taxis, Hydrogen powered vehicles, EV’s and autonomous driving.
So How did Hyundai change its fate? How did it go from near bankruptcy to the World’s Third Largest Automaker? And How is it planning to transform the world that we all live in?
Table of Contents
- The Rise Of Hyundai
- The Hyundai Crisis:
- The Comeback of Hyundai Motors:
- The Future Of Hyundai Motors:
The Rise Of Hyundai
Hyundai was founded back in 1947 as a construction company, Korea had just gained its independence from Japan (after Japan’s Defeat in the Pacific War in 1945) and was split into two countries South Korea (being administered by US at the time) and North Korea (being administered by Soviet Union).
The ideological differences and cold war between US and Soviet Union resulted in a war between the two Koreas in 1950, which ended in 1953.
And after the Korean War, South Korea was amongst the poorest of nations with an average income of less than 2 Dollar per person per week but today it is one of the richest countries in the world with a per capita income of 50,000+ US Dollars.
So How did South Korea grow so big, so fast?
The answer lies in one word, i.e. Chaebols. A system where just a couple of large, family-controlled companies control the majority of the factors of production or in other words, controls more than 50% of everything the country produces.
But why are we discussing all this about South Korea in a blog on Hyundai? This is because Hyundai was a big beneficiary of this Chaebol system in South Korea and if it wasn’t for this system Hyundai would most probably be just a small construction company somewhere in South korea.
And if you want to learn more about the Chaebol system in South Korea, Read this Blog: How Chaebols Dominate South Korea’s Economy?
Syngman Rhee, the first president of South Korea made a bold decision, instead of nationalizing the industries, he decided to auction off Government-owned factories and resources that were valued at an estimated $1.5 billion, at bargain prices.
And companies like Samsung (a trading company at the time) and Hyundai were its biggest beneficiaries.
By the late 1950s, Hyundai construction was one of the biggest construction companies in Korea and was a major business partner of the government, aligning its growth strategy with that of the government policies for economic growth. The Government in return supported Hyundai by insuring and underwriting its risky and big projects.
In the 1960’s, Hyundai started expanding into other businesses within the construction industry by winning highway construction projects and building big cement plants. This aggressive expansion and government support gave Hyundai an edge in the construction business, even among its global peers and soon was getting orders from the Middle East in the 1970’s.
This success motivated Hyundai to enter into other businesses even if they were unrelated to the construction business, such as the shipbuilding and automobile business.
Hyundai in 1967 established Hyundai Motors, an entry into the automobile manufacturing sector but Hyundai had one small problem. It did not know anything about car manufacturing and initially lost a lot of money in it and survived on cross subsidies from its parent company, Hyundai Construction.
However, Hyundai motors was soon able to find its ground in the automobile business after collaborating with Japan’s Mitsubishi Motors, which helped it accumulate technological and management know-how.
Hyundai’s first project in the automobile industry was assembling the Ford Cortina under license and had produced more than 800,000 cars. This little stint helped Hyundai gain experience in mass production.
The Iconic Giorgetto Giugiaro, designed The Pony, Hyundai’s first independent car. A car known for its affordability became a success especially in the American market where budget conscious consumers were drawn to the Pony’s low price point.
And In 1986, the Excel, a subcompact car even cheaper than the Pony, became a runaway success, selling a staggering 169,000 units in the US alone in its first year.
The Hyundai Crisis:
The success that Hyundai enjoyed with its cheap affordable cars with the consumers worldwide was short-lived, as reliability issues quickly surfaced, tarnishing Hyundai’s reputation and by late 90’s they were struggling and its annual US sales had plummeted to a meager 90,000 units, a mere 5% of what they had been just a decade earlier.
And to add fuel to fire, Hyundai Motor’s parent company was also going through some deep waters.
By the 1990’s the Hyundai Group had diversified into many unrelated business fields such as electronics or financial services. In these new businesses Hyundai just had no chance as it was already dominated by other rival Chaebols and just remained a second tier competitor.
For example, in the field of electronics which Hyundai entered in 1983, Samsung was already a king of the market, getting the first mover advantage and Hyundai just couldn’t catch up as Samsung had the first-mover advantage, had superior technology and management know-how.
And Hyundai wasn’t an exception in this, as by the 80’s many other Chaebols entered into unrelated businesses, even Samsung entered into the automobile manufacturing industry, a company later sold to Renault in 2010.
However the seeds of the crisis were sown and when the Asian Financial Crisis hit East and Southeast Asia in 1997, it swept through the Korean corporate sector and triggered a liquidity shortage and about half of the top thirty Chaebols went bankrupt.
Hyundai Group, however, would have easily survived the crisis, as it had many profitable businesses unlike other chaebols that went bankrupt but Hyundai expanded too much too fast as its total assets grew from 19 Trillion Won in 1991 to 54 Trillion in 1997 and many of these assets being loss making.
So Hyundai Group was in deep-deep trouble.
And to get out of this financial mess, Hyundai got support from the Korean Government and had to sell many unprofitable businesses and focus on core business, with Hyundai Motors being the main one.
The Comeback of Hyundai Motors:
Kia Motors had filed for bankruptcy in 1998 and Hyundai Motors decided to acquire it so as to gain monopoly power in the South Korean Car market, a bet at the time may seem a huge gamble seeing Hyundai’s own financial condition but today we know what it did for the company.
And to get out of the crisis at the time, Hyundai Motors decided to study the leading Japanese car manufacturers as they were the benchmark for quality at the time. Hyundai engineers spent countless hours benchmarking quality standards against industry leaders like Toyota and Honda, analyzing assembly line processes, and implementing rigorous testing procedures.
Hyundai then actively started recruiting experienced engineers and production specialists from other established automakers.
And to show how confident they were about the reliability of their cars, they launched a 10-year, 100,000-mile warranty in the early 2000s.
The Gamble paid off as by 2004, J.D. Power awarded Hyundai its first-ever Initial Quality Study award and today the Hyundai brand is no longer associated with Cheap cars but that of quality and reliability.
The Future Of Hyundai Motors:
Having established itself as a reliable brand, Hyundai is today working on the future of mobility and has made a $35 billion investment pledged by 2025 specifically for EVs, autonomous vehicles, and robotics.
- Electric Vehicles (EVs):
In 2016, Hyundai unveiled the IONIQ with a hybrid, plug-in hybrid, and a fully electric variant which marked the beginning of a new era for the company, showing its ambition to become a leader in the EV sector.
And in 2020 Hyundai revealed the Electric-Global Modular Platform (E-GMP), designed specially for battery EVs which offered many advantages, such as increased range, faster charging, scalability and flexibility.
It is because of this E-GMP that the IONIQ 5 (named “Car of the Year” by both Motor Trend and Car and Driver) was able to offer a range exceeding 300 miles on a single charge and also allowed Hyundai to create a diverse range of sedans and SUVs like the Genesis GV60 to high-performance cars like the IONIQ 6 GT.
- Robotics and Automation:
Hyundai is heavily investing in AI, Robotics and Automation with focus on creating smart factories for production of passenger cars, logistics vehicles and also robots to do various kinds of household tasks.
- Autonomous Driving:
Hyundai is working on its self-driving technology by using advanced algorithms, Artificial Intelligence (AI), advanced sensors and cameras, so that the car can see and understand its surroundings by collecting data from various sources.
Self driving or Autonomous driving can be categorized into 5 levels with level 1 being driver assistance where driver is still in-charge of the vehicle but the car can perform some basic functions such as cruise control whereas In level 5, the car is completely self-driving and does not require any human intervention.
So far, Hyundai has released Level 2 Self-driving features in cars such as IONIQ 5, Sonata and so on.
Hyundai has also partnered with various companies such as Aptiv, Aurora and Pony.ai to develop level 5 autonomous vehicles within the next few years and is testing the autonomous cars on public roads in California, Michigan as well as in South Korea.
- Flying Taxis:
Hyundai is also working on Flying Taxis through its subsidiary Supernal and is planning to revolutionize transportation by using Air Mobility to travel faster and more efficiently within cities.
Although the technology is still in its early stages, there will come a time when this will be the primary way we commute.