Hyundai Motor’s U.S. vehicle exports – 8 million mark (5 Things to Know)
1. Hyundai Motor’s recent sales environment in the U.S. and related challenges
The post-2008 crisis period had an impact and placed additional competitive pressure on Hyundai Motor Company (HMC), as it did for many other corporates, both Korean and non-Korean. Sometimes, crisis periods can help domestic firms. For example, the 1997-98 Korean financial crisis led to a weakening of the Korean won, making Korean exported goods relatively less expensive, thus, boosting sales. The same export-related economic phenomenon occurred with HMC during and directly after the 2008 subprime crisis. However, the post-crisis so-called series of U.S. debt buybacks known as quantitative easing (QE) has acted to weaken the U.S. dollar relative to other currencies, including the Korean won, making Korean products appear less competitive compared to pre-QE. The average U.S. car purchase price is slightly less than $30,000. Approximately 2.4 million imported cars are sold in the U.S. annually.
2. HMC’s weaknesses and strengths in the market
HMC’s strengths include its ability to provide good value for money from the purview of U.S. consumers (American car buyers). The economic crisis motivated potential buyers to think more economically about their car purchases. So, instead of a well-known domestic (U.S.) or foreign (Japanese/European) car at a relative premium price point, a certain market segment of car purchasers opted to buy relatively lesser-known Hyundai vehicles (such as the Elantra, Sante Fe, and Tucson, to name a few).
HMC’s weaknesses include its reliance on export markets, not only the U.S., but also in the EU, and more recently, in mainland China (where domestic competition is increasing on a daily basis) as well as its relative late entrance into the hybrid vehicle market sector.
3. Hyundai’s post-2008 crisis strategy
One notable strategy by HMC was the creation and implementation of the Hyundai “Assurance Program” (where buyers were able to return their Hyundai car within 1 year if facing unemployment), which linked to an extended warranty that covered vehicles for 10 years or 100,000 miles (above and beyond the market standard at that point). Together, this created a tipping point in terms of the perception of Hyundai and Hyundai cars, specifically, that it was more than just a company seeking to maximize profit, but rather, was a company that treated its customers as real people with real-life concerns.
Much like with Japanese automobile manufacturers before it, Hyundai also began producing higher-end luxury sedans, such as the Equus (which was first introduced in 1999 and redesigned again in 2009). This was strategic since such upper-end luxury vehicles carry with it a significantly higher profit margin relative to other model types.
4. Risks on the company’s future earnings
The more notable risks for HMC going forward are several. First, a weakening yen/dollar rate, which could make Hyundai vehicles appear relatively more expensive when compared to similarly situated Japanese vehicle models. Second, Hyundai must continue to focus on quality assurance so that a Toyota brake pedal-type event does not occur. In the event of such occurrence, the reputational capital that HMC amassed could quickly dissipate car sales and market value. Third, increasing capabilities of domestic car manufacturers exist in large developing markets such as China and India, that could one day compete head-to-head with HMC on their home turf at some point in time. In 2012, China exceeded the U.S. as the largest automobile market at over 240 million cars.
5. On HMC’s efforts building more manufacturing plants in the U.S. export market, and global trends of the automobile industry that the company. HMC, should consider
Hyundai has already established manufacturing plants domestically in the U.S. This is a strategic move done to avoid tariffs (import taxes) since tariffs are generally (but not always) placed on non-domestic (foreign) goods and services. In fact, given the relatively weak dollar, some onshore U.S. car manufacturers are seeking to export its vehicles outside the U.S. to offshore markets. Moving forward, HMC should continue establishing not only manufacturing but also research centers in key emerging markets such as China, India and other strategic locations.
Future trends that should be relevant to HMC include the push towards more green and fuel-efficient cars, including electric vehicles (EVs) and smaller model cars. Notably, Hyundai recently introduced a hybrid version of its popular mid-sized car, the Avante, here in Korea. While this is a leap forward, it is also over a decade after Toyota introduced its hybrid car (the Prius). Hyundai could also focus on integrating technology into its vehicle such as with seamless wifi and higher fuel efficiency.
Hyundai Motor Company (HMC) listed stock details (in Korean won):
Open: 210,500 Day’s Range: 208,500 – 212,000 Volume: 343,841
Previous Close: 208,500 52wk Range: 195,000 – 272,500 1-Yr Rtn: -1.49%
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Key Statistics for 005380
Current P/E Ratio (ttm) 6.6952
Estimated P/E(12/2013) 6.0974
Relative P/E vs. KOSPI 0.3465
Earnings Per Share (KRW) (ttm) 31,515.0000
Est. EPS (KRW) (12/2013) 34,604.9130
Est. PEG Ratio 0.8240
Market Cap (M KRW) 46,478,336.00
Shares Outstanding (M) 220.28
30 Day Average Volume 667,378
Price/Book (mrq) 1.0079
Price/Sale (ttm) 0.5215
Dividend Indicated Gross Yield 0.90%
Cash Dividend (KRW) 1,900.0000
Last Dividend 12/27/2012
5 Year Dividend Growth 13.70%
Next Earnings Announcement 04/26/2013