Hyundai makes a 'Smartivity' move to take on rivals in SUV market

The car-maker grew market share marginally, thanks to an early focus on 'smart mobility' but it's in the competitive and fast-growing SUV market that this strategy will be truly tested

Three or four years ago, Hyundai Motor India Ltd (HMIL) decided to transform itself from a plain vanilla car-maker to a “smart mobility company”. To this end, the company started investing in new technologies to develop connected vehicles and exploring manufacturing and sales efficiencies.

Those early efforts paid off when the pandemic hit car sales. In calendar 2020, though sales dropped in line with industry trends, Hyundai's market share grew marginally (see chart). Seen against the over one percentage point fall in the market share of Maruti, the country’s largest car-maker, this near-flat growth indicates staying power.  

The Korean automaker stayed the course by strengthening its position in hatchbacks and SUVs, while the manufacturing process has seen productivity- and profitability-enhancing transformations. “The world has witnessed multiple challenges in 2020. As the most innovative brand, Hyundai has emerged stronger out of this crisis, leading the way for economic revival,” said S S Kim, HMIL MD and CEO. 

When the pandemic hit, Ganesh Mani, director-production, said, "We had two choices: Sitting and worrying or rising to the occasion and converting it to an opportunity."

First, the company spent nearly 200,000 man hours on training even as the technical team, which is involved in the development of new models, embraced virtual working. Through a “no-touch manufacturing” study, the company identified around 7,200 changes, including 250 on the assembly line, to ensure that the processes conformed to infection-preventing social distancing norms.

For instance, the installation of an ultraviolet disinfection process for cars on the conveyor belt, camera-based social distancing (an alarm would be activated if violations occurred) and the deployment of medical staff helped create confidence on the shop floor.

HMIL's employees also generated nearly 2,850 ideas for cost saving and other improvements. As a result, dependence on the overseas installation team (including vendors) for project execution fell. The Korean chaebol’s Indian subsidiary now accounts for about 30 per cent of the value chain — from zero last year. It plans to raise this to 50 per cent in the immediate future.

All these initiatives helped HMIL bounce back when the lockdown was relaxed. As pent-up demand and export orders revived, the company had to mobilise additional resources, quickly hiring about 2,000 people. 

At the time, HMIL had bookings for close to 50,000 units of Creta, and had to ramp up daily capacity from 400 units to 700-plus. Close to 125 operational changes were instituted from May onwards, the result of sustained focus on becoming flexible and smart manufacturing practices over the past few years, Mani said.

Hyundai's Sriperumbudur plant, near Chennai, was the first car-maker to go on-stream after the lockdown. By early August, HMIL's capacity reached around 85 per cent, while some competitors were operating at 30-40 per cent. In just four months, HMIL produced 43 per cent of its entire annual volume and hit its highest ever single-month production with 71,178 units in December 2020. 

“We'll take our Smartivity journey to the next level and speed up the implementation of AI and data mining,” said Mani, adding that HMIL's sales objective is to touch 2018 levels (700,000-plus, domestic and exports combined) as early as possible. 

Tracking industry trends, HMIL’s growth has been powered by rising demand for SUVs, Tarun Garg, director (Sales, Marketing and Service), HMIL, said. In the past 18 months, HMIL has launched nine products including four utility vehicles — Venue, Creta, Kona and Tuscon — of different sizes and at varying price points. Meanwhile, hatchback and sedan launches, including Nios, the all-new i20, Aura and Verna, suggest that the focus is on value, rather than volumes. 

In 2016, SUVs accounted for 17 per cent of HMIL’s sales, rising to 26 per cent in 2019 and 29 per cent in 2020. Hyundai is now the leading SUV player in India with a 26 per cent market share in that segment in 2020.

The share of compacts, meanwhile, has dropped from 51 to 47 per cent, though, interestingly, the share of premium compact cars has grown from 9.9 to 13 per cent in the same period. SIAM numbers confirm this overall market shift; mini and compact cars, such as Aura, Elite i20, Grand i10, Santro, Xcent, have reported a drop in sales in 2020-21 to 1,60,274 from 2,18,803 units a year ago.

These changes point to consumer evolution. “Indian customers have evolved over the years due to the emergence and acceptance of personal mobility in India. The growing trend towards owning new-age, high-quality products by a high population of millennials is a key differentiator,” an analyst said.   

Though HMIL said it would not pull out of small cars because there is still a huge entry-level market for them, it plans to boost the SUV segment over the next two years with at least four more SUVs, with a combination of variants and a new smaller vehicle.

“Hyundai benefited because we have been investing in SUVs. Also, during challenging economic conditions, customers usually go for stronger brands because they are looking for complete assurance. It is not only about the product they are looking for but also an all-round customer experience in terms of after-sales service, availability of parts and so on, and that is why I believe the stronger brands tend to do well,” said Garg. 

But Hyundai may find itself with some aggressive competitors on the SUV track. Maruti Suzuki is planning to bring a Grand Vitara-based SUV to India in the mid-size SUV segment, positioned directly against Hyundai's Creta and the Seltos from its sister company Kia. Skoda Auto Volkswagen India, Mahindra & Mahindra Ltd and MG Motor India have also lined up new products for launch in this segment this year. In other words, HMIL’s Smartivity strategy could be in for a proper crash test in the next few years.