Investment Portfolio for Hyundai Motor Co.

Name : Ardin Fadolly

I (consultant) recommend my client, HMC to prioritize their investment portfolio (the

future investment of R&D and strategic investment) in order to achieve their vision (global
top 5 automobile company) by 2030 as follows:

1) FCEV

2) BEV

3) ICE (Conventional)

4) PHEV

The top priority for HMC is the FCEV technology. There is no dominant player on this
technology now and HMC can be the leading one if they can find a solution on FCEV
problems. The utilization of hydrogen as a fuel is a smart way to power a car. Compressed
hydrogen can have 200 times more energy with 40 MWh/kg compared to the lithium ion
batteries (278 Wh/kg) while it doesn’t add much weight to the vehicle. This technology
also offers faster way of refueling the cars with only 5 minutes while the BEV still has a 3
hours to be fully recharged. FCEV is stronger and more time-efficient options than BEV.
However, the price to fully charged the car will require 17.7 cUSD/km while BEV only
spend 2 cUSD/km. This expensive energy is due to hydrogen needs more energy to
produce. Currently, the way to produce hydrogen comes from steam reforming process,
natural gas, and electrolysis process is still considered as inefficient process (20% efficiency
losses). HMC RnD can put their focus on how to minimize the losses of electrolysis process
and create cheaper hydrogen. Hydrogen storage and transportation is also a potential
problem that need to be solved where it has low density as a gas and liquid. Hydrogen
density can be increased through high compression or liquefaction process but it takes
more energy and decrease the efficiency for almost 40%. HMC should find cheaper and
more efficient way to storage the hydrogen. Currently, the efficiency of FCEV is still around
25% left with the losses coming from the charger, electrolysis process, compression
process, fuel cell, inverter and motor which shows that FCEV technology still requires a
lot of technology improvement through research and development activities. FCEV is
totally a game changer and if HMC can wisely invest more to get more efficient fuel cell
and safer hydrogen storage vehicle technology. HMC can become the leader of FCEV in
the future.

The 2nd priority is BEV technology. Although Tesla is now a leader in BEV technology, HMC
can still have a good promising shares in this technology. BEV is an important factor in
the technology transition from combustion engine vehicle to electric powered vehicle. The
potential innovation that need to considered by HMC is a cheaper and high energy density
lithium ion battery technology and faster battery recharge process. South Korea is known
as a leader on Li-on battery technology in mobile phone and it will not difficult to get a
better battery for vehicle application. HMC can do a deep research on the complementary
technology that can increase the performance of li-ion battery such as ultra-capacitor or
dry coated battery which can increase the acceleration of the vehicle and reduce battery
charging time. HMC can also put their research on the wireless charging technology which
can help reduce the waiting time of battery charging and BEV can be charged anywhere
and anytime as long it is located near the wireless charging perimeter.

ICE as the cash-cow of HMC can still bring a promising potential sales in the future
especially if HMC can generate a more efficient combustion engine. HMC has successfully
develop their new innovation in ICE which is first Continuously Variable Valve Duration
(CVVD) technology. CVVD will optimize the move of the engine valve as desired. This
technology offers 4% better performances, 5% better fuel economy and 12% lower
emission than the previous ICE technology. HMC still shows a good bargaining position
in ICE technology and it will bring a profitable sales of ICE vehicle. That it is why, ICE is
the third priority in this portfolio.

The last priority is Hybrid technology vehicle. Toyota Prius case as a leader product in this
HEV shows how the transition of this technology worked. It was a breakthrough when it
is introduced with high fuel economy and safety packed with luxurious feature inside and
better environmental impact. This car is the first one who is competitive with incumbent
ICE especially when the price of gasoline is high. The automobile market condition in the
US can be a benchmark for every automaker future decision. The sales of Prius in the US
has reached the peak in 2012 (240.000 unit) and now decreased to only around 90.000 in
2018. It shares in the hybrid market also decreased from 59% in 2000 into 18% in 2018
which means that the automaker competitor now can offer similar added value that Prius
has. Although, the overall hybrid and plug-in hybrid share in US automobile market is still
increasing now with 0.1% in 2000 into 2.7% in 2018, this hybrid technology may not seem
showing significant impact to the overall future market share. The introduction of more
efficient and powerful engine of ICE, the fall of fuel price after the invention of shale oil
technology and tremendous innovation from Tesla BEV has create some big obstacles for
hybrid technology to earn more attention from the market. HEV is still a next potential
cash cow option after ICE but there is not much critical innovation that can be offered by
this technology.