Hyundai Motor is focusing on its strategy for the Southeast Asian market. The Southeast Asian market has long been dominated by Japanese automobile companies, but recently, Chinese companies are expanding their market share by leading with electric vehicles. Faced with limitations on growth due to high tariffs in the U.S. and saturation in the domestic market, Hyundai Motor desperately needs to target the rapidly growing Southeast Asian automobile market.
According to a Hyundai Motor Group official on the 23rd, Hyundai Motor recently established a local corporation, Hyundai Malaysia (HMY), in Kuala Lumpur, the capital of Malaysia. Hyundai Motor plans to launch three models, including sports utility vehicles (SUVs) and multi-purpose vehicles (MPVs), in Malaysia within this year.
In Malaysia, a local distributor has been acting as the sales agent for Hyundai Motor. However, with the establishment of the local corporation, Hyundai Motor will now directly undertake marketing, sales, and dealer network building.
Hyundai Motor is also building a CKD (Completely Knocked Down) factory in Kedah, Malaysia, with an investment of about 700 billion won, which is scheduled to be completed in the second half of this year. This factory will produce commercial vehicles, starting with the Staria, and plans to manufacture seven types of internal combustion engine vehicles and hybrid models in the future.
Malaysia is considered one of the three major automobile markets in Southeast Asia, along with Indonesia and Thailand. Last year, new car sales reached 816,747 units, a 2% increase from the previous year, surpassing Thailand, which recorded 572,675 units, and ranking second in the Southeast Asian market after Indonesia (889,680 units). The reason Hyundai Motor is rapidly establishing production facilities and sales subsidiaries is because of the market potential in Malaysia.
Hyundai Motor is also expanding into other Southeast Asian countries, including Indonesia and Thailand. In Indonesia, it established a factory in 2022 and is producing its flagship electric vehicles, the Ioniq 5 and Kona EV. Hyundai Motor is also operating a local corporation in Thailand and plans to begin operating a CKD factory in collaboration with a local company starting next year.
While the Southeast Asian market is dominated by Japanese automobile brands, Chinese companies have made significant progress in recent years. As the proportion of electric vehicles increases in several Southeast Asian countries, the demand for internal combustion engine vehicles and hybrid vehicles from Japanese brands is gradually declining, while the sales of Chinese electric vehicles are increasing.
According to the Nihon Keizai Shimbun, the market share of Japanese cars in Indonesia reached 95% in 2019 but dropped to 89% last year. During the same period, the market share of Chinese cars increased by about 4 percentage points from less than 2% to 6%. In Thailand, the market share of Japanese cars fell by 11 percentage points from 2019 until November of last year, dropping to 76%, while the market share of Chinese cars rose from nearly 0% to 12%.
Hyundai Motor's market share in Southeast Asia is still relatively low. Last year, Hyundai Motor recorded a market share of 3.6% in Indonesia. In Thailand and Malaysia, Hyundai Motor is still in the early stages of entry. In Vietnam, where it operates a local factory, it recorded a market share of 13.6% last year, ranking second after the local brand VinFast (17.6%).
The low market share of Hyundai Motor in Southeast Asia is attributed to the difficulties it faces between Japanese cars, which have long established market presence, and Chinese cars that are marketed at lower prices. The recent construction of factories by Hyundai Motor across various areas in Southeast Asia aims to reduce production and transportation costs, thereby narrowing the price gap with Chinese cars.
Hyundai Motor finds itself in a critical situation where it must make a concerted effort to penetrate the Southeast Asian market. This is because, in the United States, the world's largest market, profitability has deteriorated due to a 25% tariff imposed since the inauguration of the Donald Trump administration, and the domestic market has reached saturation. In contrast, Southeast Asia is considered the last remaining new market for the automotive industry due to its large population and high growth rates. In Vietnam, new car sales in 2023 increased by 22% compared to the previous year, and there was also a 24% increase last year.
To improve its low brand recognition compared to Japanese and Chinese cars in Southeast Asia, Hyundai Motor has recently expanded its investments in brand marketing.
Last month, Hyundai Motor Group signed a partnership to change the official name of the Southeast Asian Football Federation (AFF) Men's National Team Tournament to the 'ASEAN Hyundai Cup.' This tournament, which was established in 1996 and is held biennially, is known as the largest sports event in Southeast Asia, often referred to as the 'World Cup of Southeast Asia.' Japanese companies, which dominate the Southeast Asian market, had long sponsored this event, which was known as the 'Suzuki Cup' from 2008 to 2020, followed by the 'Mitsubishi Electric Cup' for the subsequent two years.
An official from the automotive industry noted, 'Although Suzuki, a Japanese automobile company, was disadvantaged compared to Japanese competitors like Toyota and Honda in Southeast Asia, it strengthened its brand image through 12 years of sponsorship.' He added, 'With this sponsorship agreement, Hyundai Motor is likely to see significant benefits in targeting the Southeast Asian market.'