Auto focus

Hyundai kicks off electrification drive in right earnest

Murali Gopalan | Updated on December 05, 2019 Published on December 05, 2019

In the fuel cell electric vehicle space, Nexo is the big draw from Hyundai’s stable and could well make its way to India next year

Indian arm eyeing the possibility of fuel cell electric vehicles

Within 24 hours of announcing its global Strategy 2025 on Wednesday, Hyundai has now made known that it is also exploring the fuel cell electric vehicle (FCEV) arena for India.

This comes at a time when electric has been the buzzword right across the think-tank NITI Aayog New Delhi, with the Centre particularly keen that this be adopted aggressively by the automotive industry. In its turn, Hyundai recently launched the electric Kona, which retails at around ₹25 lakh and had been gradually building a niche buyer base.

It will be interesting to see what the company does in the FCEV space, where its Nexo is the big draw from its stable and could well make its way to India next year. From Hyundai’s point of view, the idea would be to send a strong message of its clean air intent where the Nexo, along with the Kona, will be the key reference points.

Hydrogen, the core fuel

Hydrogen forms the core fuel for FCEVs and the challenge lies in its storage and availability. Oil companies will be roped in to help out with Hyundai’s drive and it will be interesting to see how the story pans out. For now, it would be hugely optimistic to conceive of a big market for FCEVs in India.

After all, the company is just about getting ready for the BS-VI emissions drive, which comes into effect in April 2020. Electrification will follow in due course as customers get used to a new regime of high costs and new technology. This fact has been reiterated in Hyundai’s Strategy 2025, where India is clearly not going to be an active part of the electrification radar for a good part of the following decade. Europe and North America will lead the fray while emerging markets such as India and Brazil will be on the fasttrack for electrification only in 2035.

It clearly reflects what is a more pragmatic deadline even while the Centre has been pushing the case for electric for some years now. While the overambitious target of 100 per cent by 2030 has now been pared down to 30 per cent, a section of industry observers believe even this will not be easy considering that China, which is ‘miles ahead’, has been more realistic about its goals for electric mobility.

Huge investments

From Hyundai’s point of view, the starting point for Strategy 2025 is the fact that global automakers will have to face the reality of huge investments five years from now. This is only inevitable in an era of ‘industry-wide transformation’, where profitability will be a bigger challenge thanks to sluggish growth.

It is a difficult picture to imagine: Huge investments, a downturn in many markets and profitability slow in coming. This also explains why collaborations have become the new mantra, as in the case of Toyota-Suzuki, Ford-Mahindra, Ford-Volkswagen and, more recently, the merger of Fiat Chrysler and Groupe PSA.

Hyundai, likewise, has Kia within its global group structure and it is only inevitable for the two to pool their skills in new areas like electrification. Both have constantly reiterated that they will stay competitive at the retail end while retaining their individual brand identities but back-end synergies are a given, especially when the investments concerned for the clean air drive will be substantial.

As part of Strategy 2025, Hyundai has indicated in its presentation that it will ‘contemplate new customer value continuously’ while pursuing future sustainable growth beyond the next five years. This will be done by way of providing products and services ‘which customers desire the most’.

From the Korean carmaker’s point of view, today’s buyers are leading market change ‘by creating their own contents’ and seeking ‘individually tailored consumption’. Keeping in mind this change in customer behaviour, Hyundai plans to pursue a ‘smart mobility experience’ which will imply the creation of personalised value based on digital technology as a ‘new value for customers’.

This, in turn, forms the core of SMSP (smart mobility solution provider) as the vision and strategic direction for 2025. Hyundai has indicated that as an SMSP, it will provide total mobility solutions through integration of devices and services.

The goal is to ensure that the traditional ICE (internal combustion engine) business stays profitable even while pulling out all the stops to see that the company remains in the ‘top-tier leadership’ for battery electric vehicles (BEVs) and FCEVs.

Profits and volumes

By the end of the day, the driving force will be ‘balanced and steady growth’ which will logically focus on balancing profits and volumes, region by region and across markets/models with different fuel options. The eventual goal is to ‘prioritise long-term sustainable growth over short-term target’. What the company is conveying in the process is its aggressive intent to grow its electrification business across the world in rapid time. The roles of each region have been articulated in the presentation where North America, for instance, will be all about optimal product portfolio coupled with enhancement of regional production efficiency.

In the case of China, the world’s largest car market, Hyundai intends to ‘execute business restructuring and rapid electrification’ for a better market standing. In the Asia-Pacific region, the Indonesia market has been targeted for the electric drive while for West Asia, the plan is to launch a pick-up model. Africa will see an expansion along with an intent to ‘solidify the regional top 2 position’.

India will produce emerging market-specific models which means Hyundai’s R&D centre in Hyderabad will have its hands full with products for Africa, West Asia and ASEAN. Nothing has been made official yet but it is only logical to assume that these are the markets where India will play a key role in product development along with headquarters in South Korea.

If the script goes according to plan, the team in Hyderabad, along with their engineering counterparts at Hyundai’s Chennai operations, will be exposed to a host of new global programmes which will hold the company in good stead for the future. In the process, there could be some extensive localisation happening, which means a competitive cost structure will also be in place when the Indian electrification drive takes off in right earnest post-2030.

Key customers

As part of its strategy comprising BEVs and FCEVs, Hyundai will target GenNext across the world as well as corporates as its key customers. The goal is to sell 6.7 lakh units in 2025 (5.6 lakh BEVs and 1.1 lakh FCEVs). As already indicated, developed markets will see full scale electrification from 2030 and emerging markets from 2035.

Given that this changeover will be challenging from the viewpoint of profits, Hyundai plans to elevate its brand positioning and core customer base by ‘boosting customer value during the electrification process’. Simply put, explains the company in the presentation, this will mean establishing an ‘innovative system for structural and fundamental cost-competitiveness’. Hyundai has also set itself the goal of developing a fully autonomous driving platform by 2022 and its commercialisation two years later. While working on a competitive cost structure for BEVs/FCEVs, it will simultaneously strive to eliminate inefficient and unprofitable elements of the ICE.

On the R&D side, the goal is to apply the newly developed architecture on all BEVs from 2024 while on the production aspect, it will be to secure a flexible system to market demand. Retail, likewise, will involve optimising the sales network and applying new methods of selling.

Needless to add, building scale will be the key in attaining these objectives along with, perhaps, efforts to join hands with other OEMs to bring down costs. Similarly, given the growing trends of pressure on ownership, these initiatives will factor in the role of the Ubers, Olas and ZoomCars.

It is also reasonable to assume that Hyundai will seek to change the priorities and profile of its workforce. This could see greater engagement with start-ups while also hiring mavericks who can give that extra special touch in areas like styling, design and connected features.

Published on December 05, 2019
This article is closed for comments.
Please Email the Editor