Hyundai in China: The Competitive Strategies



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Code : COM0113

Year :
2006

Industry : Automobiles

Region : China

Teaching Note: Not Available

Structured Assignment : Not Available

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Introduction:China is one of the fastest growing economies in the world with a GDP growth rate of 7.3% in 2005. A population of 1.3 billion combined with low-cost labour has made China themost sought after market by companies in recent times. The Chinese labour cost is as low as 3%of the labour cost of developed nations like the US. With the purpose of reaping the benefits of a huge customer base, high economic growth and lowmanufacturing cost, Hyundai Motor Company (Hyundai) entered the Chinese market in 1998 by acquiring Kia Motors Corporation (Kia), a Korean car company, which already had operations in China. Before Hyundai's arrival, other automobile giants like Volkswagen (VW), GeneralMotors, and Toyota had already established their presence in the Chinese market. Though a late entry, Hyundai entered into a number of joint ventures with leading domestic automobile manufacturers to penetrate into the Chinese market and quickly established itself as one of the leading foreign car manufacturers in the country.

Following China's WTO accession in 2001, as the ground rules for the liberalisation of the automobile industry were laid down, all the automobile manufacturers executed plans to grab the largest share of the Chinese automobile industry. Production capacity was expanded to cater to the booming demand, and various incentives and price-cuts were offered to lure customers.As the battle for supremacy intensified, Hyundai faced the challenges of over-capacity and falling prices in the Chinese automobile industry.

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