Hyundai Motor Company is a Seoul-based automobile manufacturer providing modern transportation solutions worldwide. In the year 2020, Hyundai was the third-largest automotive car brand in terms of market share. [1] This South Korean giant has been engaged in manufacturing motor vehicles and parts for almost seven decades with goodwill. The company managed to strengthen its position in its market by developing its internal strengths throughout the journey. Yet there are some weaknesses and threats that hampers the business and have become barriers to its future activities. Well, there are some key opportunities too that will help Hyundai to have a greater position in the industry. The following SWOT analysis of Hyundai Motor Company will help the reader understand the overall situation of the company properly.
Strengths of Hyundai Motor Company
Hyundai has seen huge success in its business over the years. This has been made possible because of its strengths like having sister concerns with high capabilities, its excellent performance in the corporate field, the established brands and the proper diversification into many other industries. This segment of the analysis will figure out the core strengths of Hyundai Motors.
Strong Affiliated Companies
Hyundai Motor group has strong affiliated companies with huge capabilities that make the company even stronger. These affiliations help the company conduct its business in almost 65 countries to sell its vehicles. In any financial or managerial crisis, these affiliations help to solve the issues and pull the company back on the right track.
Diversified into Many Industries
Hyundai has not made itself limited to only making vehicles. Through proper diversification, it has expanded its business into many industries and is doing well in those sectors. Apart from automobiles, it has widened its network to parts, finance, construction and tourism sectors as a growth strategy.This will allow the company to grow in the long term and minimize its potential risks.
Excellent Corporate Performance
Hyundai has been excellent in the corporate field. It has a great reputation for maintaining great relationships with investors, customers, employees, and other stakeholders. The company has increased synergies between their foreign bases through a production system and sales network that crosses national borders, and they continue to grow through rigorous specialized plans for each location.
Award-Winning Brands for Safety
Hyundai’s brands are very reputed in the global markets for the value they create. Its core brands won global awards for their excellent safety features. Many consider it to be one of the safest car brands in the world. This gives a competitive advantage to the company as safety is a big issue for car buyers and users.
Weaknesses of Hyundai Motor Company
Hyundai has its drawbacks and weaknesses. The company’s weaknesses include its brand portfolio issues, creation of negative brand perception, R&D issues and overdependence on the core business are some of the major problems. Any one of these flaws can have a significant influence on an organization’s overall success. This part of the discussion will give you an idea about the weaknesses of Hyundai.
Less Diversified Brand Portfolio
Although the company has expanded its presence in many industries, its core business vehicles have a less diversified product portfolio. This minimizes the sales & return as the smaller number of products means having a narrower target market. The market competitors are much ahead of Hyundai in this regard.
Limited Success Outside Core Business
Hyundai has seen less success in its business outside of the core business ‘vehicles manufacturing.’ The company invested a huge amount of capital in other businesses but got a little return, impacting its financial condition and questioning its management capacity. Further failure to boost those businesses will hamper the growth of the company.
Less Focus on Innovation
In terms of innovation, Hyundai failed to differentiate its products compared to the global competitors. Consumer preference is rapidly changing. The lack of innovation from Hyundai is a huge drawback to delivering the value modern consumers want. This weakness leads to brand switches by the existing customers.
Negative Brand Association for Misleading Advertisement
Recently, the Advertising Standards Authority (ASA) found that an advertisement for Hyundai’s Nexo hydrogen automobile was misleading, the company was obliged to remove it. Although the Nexo does not filter or remove particulates from its own brakes and tires, Hyundai claims that particulates from other vehicles may be present in the air brought into the vehicle. This incident has created a negative brand association for the company and negatively impacted brand credibility.
Opportunities for Hyundai Motor Company
The automobile business is evolving at a greater rate than it has ever been before. This opens fresh chances for the existing automotive companies like Hyundai to grow more. The booming EV sector, emerging Asian pacific markets, incentives by different governments will create huge opportunities for the company to grab. Let’s see the opportunities of Hyundai.
Booming EV Sector
Total electric vehicle sales are expected to rise from 2.5 million in 2020 to 11.2 million in 2025, and then to 31.1 million by 2030. In terms of new car sales, EVs would account for roughly 32% of the total market. [2] This huge growth will open up opportunities for Hyundai to ensure its future growth as the company is already showing success in the EV sector.
Growing Asian Markets
Economic growth and altering customer values are transforming the car industry’s potential in Asia Pacific markets. Over the next decade, private-vehicle sales value pools are likely to rise much more, potentially doubling or even tripling their current worth. Utilizing the financial services of Hyundai to give access to loans and EMI to buy its cars will significantly boost the company’s business in the emerging markets.
Cross-Business Synergy
Hyundai has strong affiliated companies that can help it to take the business to an upper level if cross-business synergies can be implemented. A perfect synergy among its financial platforms, Kia and other businesses can be created to develop a vertically integrated value chain for the company. This will minimize its cost and ensure a competitive advantage in the market.
Financial Incentives
Many governments worldwide are providing significant financial incentives to make the changeover to electric vehicles, such as cash subsidies for consumers purchasing low-emission vehicles, tax breaks for EVs, and increases or maintenance of ICE vehicle taxes. This will enable Hyundai to enter into the emerging markets and utilize these financial incentives to expand its business.
Threats for Hyundai Motor Company
The threat in the automobile industry are very conspicuous. There are so many competitors in the automobile sector, there is fierce competition, and corporations are snatching each other’s market share; strict regulations by the governments, environmental issues are the key threats Hyundai will have to face and resolve. Let’s discuss the threats for Hyundai in detail.
Strict Regulations
The way automobiles appear, how their components are constructed, the safety features that are incorporated, and the overall performance of any specific vehicle are all influenced by government regulation in the automotive industry. Especially, it will be difficult for Hyundai to utilize the Asian markets due to high tariffs. At the same time, strict regulations by the governments of developed countries will hamper its growth if it fails to meet the requirements.
Rise of Raw Materials Cost
The average vehicle is composed of 39% steel and 11% aluminum. The rise in raw material costs has been focused on high steel prices; the average cost per pound of steel used in automobile manufacture has risen 106 percent year over year. [3] This price hike will increase COGS for the company resulting in either less profit margin or increasing price of the cars, which may hinder growth in the mass-markets.
Negative Brand Perception
Consumers, especially the Asian markets, perceive European and American brands as superior to Asian-made products. This drawback hinders the brand from utilizing the luxury car market properly. Besides, some recent quality issues of Hyundai cars aggravated the condition. If not resolved quickly, the consumers’ negative perception will decrease its brand equity.
Increased Global Competition
The primary threat to Hyundai’s future growth is the worldwide market’s extreme competition. Hyundai competes in the global market against a slew of global brands such as General Motors, Ford, and Toyota, and also local brands in emerging economies such As India and China. This extreme competition has created consumers pressure that must be fulfilled. Failing to cope with the situation will lead the company to face a huge crisis in the future.
Recommendation for Hyundai Motor Company
Hyundai’s global strategy, such as FDI, should be continued in the future, with an emphasis on expanding its presence in emerging markets such as China and India, where sales are growing exponentially, or Brazil, where purchasing power is increasing. Furthermore, the company should maintain a substantial competitive advantage over other worldwide competitors who have already established a reputation for high technology and innovation. Creating a perfect synergy among its affiliated companies and developing a vertically integrated business model will help Hyundai gain a competitive advantage and resolve the threats & issues. Thus, Hyundai can accelerate to a better future for its business.
References
- Global automotive market share in 2020, by brand – Statista;
https://www.statista.com/statistics/316786/global-market-share-of-the-leading-automakers/ - Electric vehicles, Setting a course for 2030 – Deloitte Insights;
https://www2.deloitte.com/us/en/insights/focus/future-of-mobility/electric-vehicle-trends-2030.html - Raw material costs rising for automotive industry: BofA report – Yahoo Finance;
https://finance.yahoo.com/news/raw-material-costs-rising-for-automotive-industry-bof-a-report-172812315.html
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