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Warmer China-Korea relations won't solve Hyundai's woes
Yang Jian | 2017/11/3

SHANGHAI -- Hyundai Motor Group executives surely feel a deep sense of relief now that China is easing a diplomatic standoff with South Korea.

The automaker¡¯s China sales tanked after a U.S.-made missile defense system began arriving in South Korea in March. The dispute aroused anti-Korean sentiment and many consumers boycotted Korean products. 

In the first nine months, Beijing Hyundai¡¯s deliveries plunged 37 percent to 779,000 vehicles. The company¡¯s sibling brand, Kia, also suffered a sales meltdown.

But President Xi Jinping has buried the hatchet and Chinese tourists are again flocking to South Korea. So everything is fine for Hyundai, right? Maybe not.

Hyundai¡¯s troubles in China are partly self-inflicted. In fact, the Korean automaker started to lose market share two years ago -- long before the missile dispute.

In 2015, Beijing Hyundai¡¯s China sales dropped 5.1 percent even though industry sales rose 7.3 percent. Beijing Hyundai also underperformed in 2016, when its deliveries increased 7.5 percent in a market that grew 15 percent.

What went wrong? The Korean automaker failed to respond to evolving consumer tastes.

In the past two years, Chinese car shoppers began migrating from sedans to crossovers and SUVs. Most global automakers and nearly all Chinese brands expanded their lineups in those two segments. 

By contrast, Hyundai did not introduce any new crossover or SUV in China.

Now the Korean automaker seems to have realized its mistake. Next year, Hyundai plans to launch a subcompact crossover and a seven-seat SUV. The two models will help revive Hyundai¡¯s China sales, but only to some extent. 

Other foreign automakers are racing to add crossovers and SUVs to their product mix. And two Chinese brands, Geely and Great Wall, have launched crossovers for their new premium brands to compete with global rivals.

To win back market share, Hyundai must introduce more competitive crossovers and SUVs. And it will have to expand its lineup of electric vehicles to meet the requirements of China¡¯s carbon credit program, which takes effect in 2019.  

That¡¯s a tall order. On both fronts, Hyundai and Kia face an uphill battle.

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