Tailoring cars to fit the country

In India, the South Korean motor giant is building minicars, while in Russia cars come with a higher clearance from the road to cope with snow and ice.

While many analysts, banks and policy makers may think of emerging economies as a unified market, Hyundai Motor Group is tailoring its strategy from country to country.

In 2001, a Goldman Sachs analyst, Jim O’Neill, came up with the BRIC acronym, placing Brazil, Russia, India and China in one general grouping. For all their dissimilarities, the common denominators among them are that each is huge in population and geographical reach, and each has visions of modernising industrially.

After the world plunged into economic crisis three years ago, the Group of 7 industrialised nations yielded some of its international authority to the G20, which includes the BRIC countries and a few others like Mexico, Argentina and Turkey. A focus on the developing world is in fashion.

Individualised approach

Hyundai’s engagement with such economies started before that happened. But Hyundai is going for an individualised approach.

“Even though the BRIC countries are lumped together, we don’t do ‘one size fits all,”’ Kim Seung-tack, Hyundai Motor’s executive vice president for global business planning, said at the company’s global headquarters in Seoul. “We go the extra mile to accommodate the market.”

Hyundai is one of the world’s top five vehicle manufacturers, with worldwide production last year of 4.6 million vehicles. For Hyundai Motor and its sister company, Kia Motor, the numbers show the success of a strategy of focusing on emerging markets.

While China and India are easily Hyundai’s two biggest markets in terms of overseas manufacturing, nothing better illustrates the desire for market accommodation than the company’s plans for Brazil.

Hyundai already sells SUVs and light trucks assembled in Brazil, with all components finished and shipped from Korea. Now the company is building its seventh overseas manufacturing facility to produce mainly subcompacts in the industrial city of Piracicaba, 160 km, northwest of São Paolo.

These small cars will be different from any others in the Hyundai inventory. Engineers at the company’s research and development center south of Seoul are developing a small-vehicle engine that runs on gasoline and alcohol extracted from sugarcane. They are commonly known as ‘flex-fuel cars’.

“Flex fuel is unique in Brazil,” said Kim Tae-nyen, director of international cooperation at the Korea Automobile Manufacturers’ Association. “The whole Brazilian market is flex fuel. It’s a mandatory requirement to have flex fuel for small cars.”

Hyundai is behind the competition from Japan and the United States, as well as Volkswagen of Germany, in getting into the flex-fuel market, a field that is not tapped on a mass scale anywhere but Brazil. But Hyundai expects to catch up quickly. Its flex-fuel cars are to go into production in two years, and its factory for manufacturing larger vehicles is to be operational in three years.

Hyundai Motor’s most successful operation is in Beijing, where two factories produce 600,000 cars a year.

The company’s most dramatic accommodation, however, may be in India, where two factories in Chennai are turning out 600,000 vehicles a year. Most are minicars, and half of them are for sale in India, where the compacts that crowd roads in northeast Asia are beyond the financial reach of many buyers. The others go mainly to Europe. “Every country’s taste is different,” said Kim, “but India is our small cars’ manufacturing base.”