Korea gears up for second growth phase in India

Hyundai and Daewoo heralded the entry of South Korean car brands into India nearly two decades ago. This was the time the country had kicked off its historic reforms exercise and multinational automakers were given the go-ahead to invest here.

Meanwhile, the Asian financial crisis was brewing and 1998 saw a realignment of ownership within the troubled Korean car industry. Hyundai took charge of Kia Motors while Daewoo threw a lifeline to SsangYong. Renault then bought out Samsung Motors which had just begun to make cars.

Back in India, both Hyundai and Daewoo were making their intent known with their small car offerings to take on market leader, Maruti. Things, however, were not so great for Daewoo’s operations in Korea and it was in dire need of a bailout. Ford was tipped to be its initial suitor but General Motors (GM) finally emerged the knight in shining armor in 2002.

The collapse of Daewoo meant that Hyundai was the sole Korean brand in India that had affirmed its intent as being the closest rival to Maruti. The Daewoo plant in Surajpur was soon abandoned though its new owner GM got a fresh lease of life with Korea emerging one of its key hubs.

Meanwhile, China’s SAIC Motor Corp took a controlling stake in SsangYong which was eventually acquired by Mahindra & Mahindra. Yet, there has been no indication of any Korean brand entering India since Daewoo’s exit. Sure, SsangYong has shipped out its Rexton SUV here in small numbers but is clearly more focused on China, Europe and the US.

It is only lately that Kia Motors’ name has begun doing the rounds though it has not made any official confirmation so far. However, industry sources say everything is in place for an investment in Andhra Pradesh which will give Kia access to its parent company Hyundai’s robust manufacturing base and vendor park in neighbouring Chennai.

In fact, it is a mystery, why the company did not make an earlier entry to a market tipped to be the world’s third largest car producer by 2020 after China and the US. After all, a Hyundai-Kia combine would be better suited to take on the might of Maruti Suzuki, which has been growing from strength to strength. Kia, of course, will have its own retail network in place even while optimising synergies with Hyundai at the back end. Eventually, the objective is to build its own brand identity in this intensely competitive market. Assuming that a decision to set up shop in India does happen in the coming months, it will not be until 2020 when the plant is fully operational that Kia will be ready to kick off its innings.

Yet, it is never going to be late in a country whose market potential is immense thanks to low car penetration levels at less than 20 per thousand people. In addition, India is the world’s largest producer of two-wheelers at 18 million units annually, and it is only logical to presume that at least five per cent of buyers here will graduate to cars every year.

The growing affluence levels of the middle-class coupled with the fact that this is the youngest country in the world will also be a good reason for Kia to woo buyers with its stylish product range. This will complement the efforts of Hyundai which has been on a roll lately led by the heady market response to its Creta SUV.

Kia’s latest annual report also gives an idea of its strategy going forward. “Through Kia Motors’ global brand campaign ‘Re:Design Your Life’ and Hyundai Motor Group’s vision ‘Together for a Better Future’, we will design new products that enrich our customers’ lives while continuing to improve customer value as a global brand by practicing five core values: customer, challenge, collaboration, people, and glocality,” it states.

The corporate strategy slogan, ‘Re:Design Kia’ boils down to redesigning the future journey of innovation which is the basis for Strategy 2020. This consists of three strategic directions – extending market presence, developing Kia’s unique competitive edge, and achieving operational excellence.

As part of this exercise, the company will strengthen its presence in advanced markets while revving up its China expansion plans. In addition, it will identify ‘emerging high-potential markets’ and while India has not been specified, it fits in perfectly with Kia’s objectives.

Even more interesting is the intent to operate a ‘glocalised’ entity which literally means thinking local while aiming global, something which MNCs have realised is imperative to be able to operate in price-sensitive markets like India.

According to the report, Kia is keen on ‘creating a new future and realising humanity’s dreams’ by thinking creatively and tackling challenges head on. Its vision is to provide a new space that ‘makes life more convenient and enjoyable by realising superlative mobility’.

“We refuse to be complacent, embrace every opportunity for greater challenge, and are confident in achieving our goals with unwavering passion and ingenious thinking. We create synergy through a sense of togetherness fostered by mutual communication and cooperation,” adds Kia.

It now remains to be seen how the company plans its India script right from identifying the plant to getting a retail network in place. Its biggest strength is the presence of Hyundai, which knows this market inside out. Daewoo was among the earliest entrants here and could have been a tough rival to Hyundai. It is now Kia’s turn to pad up for a new Korean innings in India and complement a strong parent.

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