Hyundai Motor Group is the
third largest automaker in the world by volume. This is no mean feat for
a company that just some years ago was considered
a low quality copycat. Now, the three auto
brands in Hmg's stable are nipping at the heels of
well-established competitors and winning
award after award. The Hyundai that we see
today, especially from an American perspective, um,
would surprise people if they remember the Hyundai
that first entered the American automobile
market years ago. While Tesla still
dominates the EV industry, Hyundai and Kia are
inching closer so far. On the electrification
side, you know, Hyundai has done a really great
job. They've put some some
fantastic products out there. But the company doesn't
stop at EVs. It wants to revolutionize
manufacturing, invest in robotics, autonomous
driving and flying taxis. Many of the bold
ambitions other automakers have stepped back from
Hyundai remains committed to. I think we are a
technology company. When you look at
everything we're doing, we're doing things that
that are almost science fiction. But the company has faced
plenty of setbacks, a plague of thefts so bad
some insurers refused to cover their cars,
millions of vehicles at risk of catching fire, a
looming union push and a snub from the US
government on top of it. In this time of
tremendous change, there are no proven strategies
for success. Everything is a gamble
and Hyundai is a player. In just one decade. Hyundai Motor Company,
which excludes Kia, went from about $80 billion in
revenues to an expected 124 billion. Sales dipped slightly in
2020, but by 2021, more than recovered. 2023 was
Hyundai's third consecutive year of
record breaking retail sales, this time totaling
more than 700,000 units, about eight times
Hyundai's total sales in the late 1990s. Of course, several
automakers reported large gains in what economists
called a surprisingly good year, but Hyundai did
surpass American Italian automaker Stellantis. As of January 2024,
Hyundai is now the fourth most popular brand in the
U.S., behind Ford, GM, and Toyota. The Hyundai Kia
Duo, along with Hyundai's premium brand Genesis,
beat all of those companies in EV sales. This is despite the fact
that its vehicles didn't fully qualify for the
federal tax credit. Customers can get
discounts if they lease Hyundai vehicles, which
has sent the company's lease rates from 2% to
30. They're generally widely
considered some of the most advanced vehicles,
especially their electric vehicles. The E-gmp
platform and some of the stuff that's coming in
the next few years is considered some of the
some of the best EVs on the market. E-gmp stands for Electric
Global Modular Platform. The skateboard like
chassis is meant to be extremely flexible enough
to underpin a wide range of vehicle shapes. It is loaded with cutting
edge tech, among other things, rapidly fast
charging. I want to just call the
attention to what happened recently in Chicago when
the temperatures were extremely low, right? So
thankfully our cars have different technology,
different system, and then had no issues with the
charges or with the vehicles. 2023 US sales of its fully
electric Ioniq five were up 90%. The hybrid Tucson and
plug in hybrid Santa Fe both set sales records. In a bit of historical
irony, the Hyundai Ioniq five by every by
basically everyone's standards, is a far, far
superior product to Toyota's comparable
competitor, which would be the Bz4x's. It is a historical irony
because you could argue Hyundai got to where it
is today, in part by imitating Toyota. Hyundai Motor was founded
in 1967, growing out of one of Korea's massive,
typically family run conglomerates known as
Chaebols. Its first assembly plant
in Ulsan, Korea, is still one of the world's
largest factories, capable of making 1.6 million
vehicles a year. Ulsan's first project was
making a car for for the Cortina. What it learned
led to its first car, the pony. It then made a move
it would repeat in the future recruit a talented
outsider, in this case Giorgetto Giugiaro. One of the most iconic
names in car design, and he was the one that that
styled the original pony's exterior. And that helped
ensure that, you know, this car coming from a
nation that was not known for building cars, um,
had a car that looked modern and contemporary
and all that. The Giugiaro designed
successor, the Excel, was the first car sold in the
US in 1986. They were cheap and, you
know, I mean literally cheap in in every sense
of the word. You got what you paid
for. Its low price iconic
designer and the fact that it was from an Asian
country at a time when Americans were besotted
with the Japanese reputation for quality
and reliability made it a staggering success. It sold 100,000 units in
the first seven months, nearly 169,000 for the
full year, probably the strongest US launch by an
import carmaker ever. But pretty quickly,
customers realized Hyundais weren't built to
the standards of Japanese cars. By 1998, Hyundai's
annual US sales had dropped to about 90,000
vehicles. The top management
realized about how important quality and
safety was, and there was a huge focus on improving
the quality. Hyundai's chairman and CEO
at that time, Chung Mong koo, adopted a fast
follower strategy adopt the best practices of
leading car manufacturers, which at the time meant
Japanese automakers like Toyota and Honda. Under him, Hyundai
ruthlessly benchmarked its quality against its
neighbors. Then they designed a lot
of automation in the at the end of the assembly
line to do quality checks. They were keeping good
records on quality defects, which let them
diagnose stuff. In early 2000, actually,
their quality level became very comparable to US big
three cars and the Japanese cars. Even
though their brand value, it was still lower than
their competitors. The next step was to put
its money behind its new claim by launching a ten
year, 100,000 mile powertrain warranty. That was a real headline
grabber. It certainly helped
communicate to consumers, to American consumers
that Hyundai was actually serious about quality. Now they were no longer
the purveyor of cheap, um, uh, poorly made cars. Um, no, they were now
cars that were well built enough to be backed by,
uh, one of the strongest warranties that anybody
had ever heard of. The 1997 Asian financial
crisis led to the collapse of many companies in
South Korea, including car makers. Daewoo was a
casualty, and so was Kia until Hyundai bought a
51% stake in hopes it would boost sales in
Europe and the US and repair its image problem. Over time, the stake has
been reduced to about 33%. Hyundai offered $886
million, and proposed creditors forgive 80% of
Kia's more than $7 billion debt. The two combined
formed the Hyundai Motor Group. The arrangement is
complex, but allows the two companies to share
technology platforms and, crucially, top staff. They brought in heavy
hitters from respected European brands Peter
Schreier from Volkswagen Group and Luc
Donckerwolke previously at Bentley, Lamborghini,
Audi and Skoda engineer Albert Biermann came from
BMW high performance M division. That really started to
transform the way people thought about products
from this company. Suddenly you had cars
like the Veloster N and then, you know, their
SUVs. You start to see really interesting design
across all three of these brands. You know, they
didn't look like anything else. You know, they were
they were really attractive. And each each
brand had its own unique signature to it. There have been missteps
and obstacles. Its high end Genesis
brand struggled at first, despite critical acclaim. This is primarily because
its lineup for the first six years of its
existence was made up of sedans in a market that
was turning toward SUVs. More alarmingly, millions
of Hyundai cars have been recalled over fire risk. The company's reputation
took a hit after a rash of.
Thefts, the. Cars lacked engine
immobilizers, a mechanism that renders the engine
useless in the event of a theft. These are just some of the
wild videos posted on TikTok. The cars stolen
in just seconds. Despite the fact that, you
know, they have a much better quality reputation
today than they did 25 or 30 years ago, there's
still things that keep popping up here and
there. Hyundai has spent hundreds
of millions of dollars addressing the crisis,
both in developing the fix, a software update,
and providing clinics and stadiums and parking lots
with hired technicians to avoid overwhelming
dealers. It's been a huge success,
and then we see a lot of positive sentiment and
definitely a decline in the number of anti-theft
cases, right? Like its peers, Hyundai is
also facing a labor movement. Emboldened by
exceptionally successful negotiations with Detroit
automakers, the United Auto Workers union has
turned its attention toward foreign automakers
with nonunion US factories as of February 2023. The union says more than
30% of workers at Hyundai's Montgomery,
Alabama, plant have signed union cards. Hyundai says
it plans to raise wages by 25% through 2028. We don't have facts to
justify or to confirm that they have 30%. We will just stay the
course. We'll offer our employees
the very best. We have support from our
management in the plant, from the local
authorities, from the state authorities. And
then, you know, if one day we have to make an
election, okay, let's go and get the workers to to
choose. So far, they've chosen
not to be unionized. And let's see what
happens. It is also hampered by
trade policies. The federal EV tax credit
through the Inflation Reduction Act is only
fully available to American made cars. When a President Biden
visited a South Korea back in 2022, and then our
executive chair, Mr. Chung presented to him
the investment plans in the United States, which
at the time were $10 billion. Now we're more
than 12.6 billion and probably growing, right. So the president said, no
worries. We appreciate your
investment. We won't let you down. That was made
in August. We saw IRA and all of a
sudden our cars would not qualify for the so-called
IRA, which in our view was a not good. We, uh, were not happy,
but we said we'll double down so that we will
hopefully qualify sooner rather than later. The $12.6 billion is going
to a plant near Savannah, Georgia. It's a site that
will include both vehicle assembly and two battery
manufacturing plants, both in partnership with
Korean battery tech makers. Nevertheless,
Hyundai has kept up with investments in hybrids,
plug in or otherwise a powertrain. Automakers
such as Toyota have argued are a better solution for
electrification in the short terms. But also I've mentioned to
to the dealers that we will be ready to react
and be flexible should the conditions change. So,
for example, what if consumers want more
hybrids? Okay, then we'll produce
more hybrids. We'll bring more hybrids
to the market. We want it to be always
flexible, but in principle we still see the great
opportunity on the battery. It is. But it is also publicly
boasted it has the world's largest share of hydrogen
vehicles, a powertrain that has not taken off in
passenger cars and has been ridiculed by the
likes of Tesla CEO Elon Musk. Hyundai makes the
Nexo fuel cell vehicle and teased the hydrogen
powered N vision 74 concept. A new factory
and innovation center in Singapore is highly
automated and uses what it calls a cell based
production system. Cars are assembled at
stations rather than on the conveyor that
dominates the industry. This is where Hyundai is
working on many of its newest ideas. These are
the ones Munoz grows most excited about. He uses
the terms science fiction frequently. Some people criticize the
company because, you know, those areas are too much
advanced so that you know those each of those areas
has a high level of uncertainty, a. Partner supplier, Aptiv,
said on a recent earnings call it would begin
reducing its investment in motional, a joint project
that makes autonomous driving technology
another once hyped area that other automakers
such as Ford, have backed away from. Hyundai has
not. So technology is something
good and we are fully committed to that. So one
of the partners, which we appreciate very much,
they decide to to reduce or to exit, okay, that's
that's fine. Hyundai is also taking
risks in distribution. The automaker is also the
first to collaborate with Amazon on a pilot project
selling cars through its platform. The online sales are going
to happen no matter what, with and or without
Amazon, and with and or without Hyundai, because
definitely this is the trend for everybody. You know, they don't
imitate. To Tesla. They don't imitate the
Toyota. They don't imitate US
companies. Because in this new
industry, new game board, there is no leader, which
is totally different from past industry. This has changed the
culture. Management under Chung
Mong koo was top down, laser focused on a clear
goal improve Hyundai's status in quality
rankings. Five years ago, if I
thought I would be where we are today, well, I was
not as optimistic. I thought we were going
to make progress, but I think we made way more
progress than everybody expected.
