By N Madhavan| Jun 21, 2016
Young Key Koo, MD and CEO of Hyundai Motor India Ltd, says the country is a key market for the carmaker and that its focus will now be on creativity and innovation
When Hyundai entered India in 1996, not many knew about the company. Bollywood superstar Shah Rukh Khan was roped in to introduce the Hyundai brand to Indian consumers in an advertisement. Twenty years and many car models later, Hyundai Motor India Ltd (HMIL) is today the second-largest carmaker in India and the largest exporter of cars from the country. Young Key Koo, MD and CEO of HMIL, set up the company’s sales network during his first stint with the carmaker in 1997. In an interview to Forbes India, he discusses how the Indian market has evolved in the past two decades, the challenges faced by the company and its successes and failures. Edited excerpts:
Q. You set up HMIL’s sales network when it started operations in India. Now, you are back as MD. What has changed for the company in this period?
India has become one of the fastest growing automotive markets in the world. By 2020, it is expected to be the third-largest market (in volume) after China and the US with sales of over 4.5 million cars annually [it is currently in fifth place]. For Hyundai Motor Company (HMC), India has become a key market. Last year, HMIL sold 0.47 million units and had a market share of 17.3 percent. The sales growth was 16 percent, which is double the industry average. HMIL contributed as much as 13 percent to HMC’s overall sales volumes.
The most significant change is that the purchasing power [of people] has risen sharply. In 1996, only a small section of the population could afford cars. Today, a strong middle-class has emerged. People in this segment are well educated, have a good job and a reasonable income. They aspire to own a car. This aspiration is further fuelled by the availability of finance. In India, over 70 percent of cars are financed; a strong financing system is helping people buy cars with minimum investment. These factors, apart from GDP growth and improving road infrastructure, are contributing to the growth of the auto industry.
Q. Hyundai has come a long way in India since 1996...
When we entered India in 1996, not many people knew about Hyundai or for that matter, South Korea. Everyone knew about Ford and General Motors when they started operations in India. Our brand awareness was low. But we had a strong desire to succeed in India. We built a fully integrated manufacturing plant near Chennai in just 17 months. We brought in new products, new technologies and invested $1 billion [in 1997]. Today our investment has grown to the tune of $3.1 billion and capacity to 0.64 million units. Since we began production, we have manufactured and sold 6.6 million cars [as of April 2016] from this plant. Of these, 4.2 million were sold in the domestic market while the others were exported. We have become the second-largest player in India and the largest exporter of cars.
Q. HMC showed the world that India can be a small car hub. How did this come about?
Compact cars account for over 50 percent of the Indian car market. HMIL has a strong presence in that segment with models like Eon, i10, Grand i10 and i20. Hyundai Motor group [including Kia Motors] has 30 factories across 10 countries in the world. But only HMIL produces compact cars and, therefore, it has become the hub for small cars for the entire group.
We started with ‘Make In India’ in 1999 when we exported 20 units of Santro to Nepal. In 2015, our exports were 0.17 million units. We were the first Indian car manufacturer to export to mature markets in Europe. We export to 92 countries now (previously it was 120 countries, but Europe is now handled by our Turkey plant as part of our global export strategy). The Grand i10 is the No. 1 bestseller in Vietnam while Eon has a good market in the Philippines.
Q. One strategy that HMIL has employed effectively to gain market share in India is to introduce the latest technology, features and designs in their cars...
When we launch a new product in India, we want to bring in new design, new technology with high quality. With Santro, we made air-conditioning and power steering a regular feature. We also introduced common rail diesel engine and multi-point fuel injection technology in the country, especially for compact cars. We also brought in modern fluidic design philosophy into our cars. Our focus on design, technology and quality has helped three of our latest launches win the ‘Indian Car of the Year’ Award 2014 (Grand i10), 2015 (Elite i20) and 2016 (Creta). Also in the last JD Power quality ratings (Initial Quality Study), Eon, Grand i10 and i20 top their respective segments.
Q. Is the SUV segment the next focus area for HMIL?
We launched Creta in 2015 and it has been well received. In fact, it has created a segment of its own and is contributing to the expansion of the SUV market in India. We also have Tucson and Santa Fe for those wanting larger premium SUVs. In 2019, we plan to launch our sub-4 metre compact SUV and that will complete our SUV portfolio. We are already strong in the compact car segment and we will become so in the SUV segment too.
Q. If there is one segment where Hyundai has failed to make a big impact, it is the premium car category. Your earlier attempts have failed. How do you plan to offer your existing customers a compelling option to upgrade?
Before we launched Creta [which costs between Rs 10 lakh and Rs 15 lakh], our average selling price was Rs 4 lakh. Now, our average price tag has risen to above Rs 7 lakh—almost an 80 percent jump. While compact cars remain our bread and butter in India, we are clearly moving up. But I cannot deny that we have not been successful in the premium sedan segment with Elantra and Sonata. Though this segment is small, we will not give up. We will come up with new options for our customers. We cannot be focusing only on compact cars.
Q. What sort of challenges has Hyundai faced in the last 20 years?
The sheer number of players has been a big challenge. In 1996, there was just one large player [Maruti Suzuki]; now there are 19 and they have launched their own new products in the market. The second biggest challenge is the customer, who is spoilt for choice. We need to constantly understand them and offer products that suit their tastes/needs at a price they are comfortable with. Also, today marketing is not just [offering] discounts and advertising. We need to engage differently with customers and build the brand in collaboration with various people. The ‘Drive mein junoon’ video is one such effort. Singers Arijit Singh and Clinton Cerejo have composed a music video with 118 sounds that they have created on a Hyundai Elite i20. The video had 1 crore views within a month. What better way to touch young future car buyers?
Q. How has the Hyundai brand evolved since Shah Rukh Khan introduced it to Indian consumers?
Shah Rukh Khan’s association with Hyundai is 18 years old. I think this is one of the longest [brand ambassador] relationships in the world. In an event that we organised for employees to celebrate the completion of 20 years in May this year, Khan said he is the longest serving employee of the company. We value his relationship. With regard to the Hyundai brand, I think brand awareness is very high. Everyone in India knows Hyundai. We have 10 products in the market—from Eon to Santa Fe. When it comes to ‘familiarity’, the second metric that is normally tracked for evaluating a brand, we are high. We are now focussing on the third metric—‘consideration to buy’. Today, customers have multiple choices and we want to increase the various factors that they consider and opt for a Hyundai product. ‘Preference’, which means loyalty, is the last part. When we reach the ‘preference’ stage, we will be the No. 1 player in the country, not necessarily in terms of volumes.
Q. When do you think Hyundai will become the market leader in India?
We are already No. 1 in India… in terms of exports. We cannot take it all [laughs]. We are No. 2 in terms of volumes. There are two aspects to market leadership—quantity and quality. We are already there when it comes to quality leadership and we are working hard to go to the next level so that our brand becomes the most preferred one in India. Leadership in terms of volume depends on production capacity and will take time. We cannot challenge the market leader yet on the capacity front. We are for now happy with our No. 2 position in terms of volumes and are working hard to position Hyundai as a modern premium brand.
In the last 20 years, we focussed on perseverance (in taking on challenges) and speed. In the next 20 years, we need to focus on creativity and innovation. This will make us a modern premium brand.