See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/282390975

Hyundai Motor Company in the Indian Market

Article  in  Asian Case Research Journal · June 2015

DOI: 10.1142/S0218927515500029

CITATIONS READS

0 13,435

2 authors, including:

Young-Eun Park
Prince Sultan University
18 PUBLICATIONS   30 CITATIONS   

SEE PROFILE

All content following this page was uploaded by Young-Eun Park on 22 May 2019.

The user has requested enhancement of the downloaded file.

 ASIAN CASE RESEARCH JOURNAL, VOL. 19, ISSUE 1, 29–57 (2015)
ACRJ
This case was prepared by
Assistant Professor Young-
Eun Park of Al-Yamamah
University, Saudi Arabia
and Professor Dong-Kee
Rhee of Seoul National Uni-
versity, Korea, as a basis for
class discussion rather than
to illustrate either an effec-
tive or ineffective handling
of an administrative or busi-
ness situation. This study was
supported by BK Center of
Seoul National University.
Please address all correspon-
dence to Professor Dong-Kee
Rhee, College of Business
Administration, Seoul Na-
tional University (58-309),
1 Gwanak-ro Gwanak-gu,
Seoul 151-742, Korea. E-mail:
rheedong@snu.ac.kr.
© 2015 by World Scientific Publishing Co. DOI: 10.1142/S0218927515500029
S0218927515500029.indd 29
Hyundai Motor Company in the
Indian Market
“If the roads of a country are the arteries, the cars are the blood. I will
never give up on the automobile. Even if I do not succeed, I will be
content just having placed stepping stones for my future generations.”
— Former CEO Ju-Young Chung, in conversation with the
US Ambassador prior to exporting the Pony in 1977
With the realization that the only way for the company to
survive was to produce 100% domestic cars, former CEO
Ju-Young Chung decided to commit 100 million dollars to
construct an automobile manufacturing factory that would
produce 50 thousand vehicles annually by 1967.a At that
time, not only was the development of automobiles difficult,
but annual domestic sales did not even reach 1,000. In such
a situation, Chung began the biggest gamble of his life: “We
will make money by exportation.” With such high hopes,
Chung showed the courage to target foreign markets for
profit. In 1976, he released Korea’s first and very own auto-
mobile brand, the Pony. It captured 43% of the domestic
market and began being exported to Ecuador, Africa and
parts of the Middle East. On the strength of the Pony’s great
success, Pony 2 was released in 1982. It sold over 40 thousand
units domestically in its first year, was exported to Canada in
1983, and sold 80 thousand in 1986. In 1985, Hyundai Motor
became the first Korean corporation to establish its local sub-
sidiary in the US. It broadcast TV commercials on three major
a The Hyundai Motor Service Center was established in Chungmuro, Seoul to become
the hub of today’s Hyundai Motor Company. In the beginning it started out as a
service center but later expanded into an automobile remodeling center.
30/7/2015 5:01:11 PM
 30  ACRJ

networks with the slogan, “Cars That Make Sense.” After

viewing the commercials, Korean residents in the US cried
tears of joy. Up until then, they thought that Korea still sub-
sisted on aid goods.
As Korea’s representative automobile manufacturer,
Hyundai Motor Company (HMC) led in globalizing the
Korean automobile industry by expanding into domestic
regions in order to widen its sphere of activity to foreign
markets. Since acquiring Kia Motors in 1998, HMC (Hyundai-
Kia Motors, CEO Mong-Koo Chung) leaped from 10th place
in 2000 to 5th place in 2010 in global market shares (see
Exhibit 3). In the past 10 years, Hyundai-Kia created out-
standing results when compared to global competitors, with
an annual average growth rate of 9%. By 2010, the corpora-
tion recorded 7th in the US market with a 7.7% share, 8th in
the Chinese market with 9.8%, 8th in Brazil with 4.7%, 2nd
in Russia with 10.0% and 10th in the European regions with
4.5%. The corporation ranked 2nd in India’s market with an
astonishing share of 19.1%. Its activities particularly stood
out in the Indian market, with its immense population of
1.2 billion, by recording an annual economic growth of 8%.
Hyundai increased not only sales in advanced markets but
also in emerging markets around the BRICsb to grow in each
region throughout the world.1

ENTRY INTO INDIA

India’s Market: Ultimate Chaos

“15% of all mankind, in other words, one-seventh, live in the

magical land of India. However, it is not easy to find the univer-
sality that corresponds to one-seventh of human culture. Culture of
India is just unfamiliar and mystical.”
— Gitanjali Susan Kolanad, Indian regional expert

b BRICs refers to the 4 emerging nations of Brazil, Russia, India and China that have
displayed rapid economic growth in the 2000s. South Africa has recently joined as
the 5th nation.

S0218927515500029.indd 30 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  31

With a size 33 times the area of South Korea, India comprised

28 states and 7 union territories with different languages, cos-
tumes, religious observances, arts and food. Diversity also
existed within each single region according to social rank.
Such elements of diversity could be discovered on the streets
and roads of India. It was difficult to find actual streets for
pedestrians in India. People took part in various activities
unconnected with the original purpose of streets such as
sleeping, selling goods, parking bicycles, drinking tea or lis-
tening to cricket games over the radio. Roads in India were
also chaotic. Traffic was a day long frenzy of buses, trucks,
cars, auto-rickshaws, cycle-rickshaws, bicycles, motorcycles,
cow-wagons, cows, dogs, camels, elephants, and fearless
pedestrians.
Owing to a backward infrastructure and decline in
traffic safety awareness, India displayed the ultimate in road
chaos. Traffic lanes and signals were rarely seen. Further-
more, citizens went their ways even with cars coming at
them. When cars entered roads that were under repair or con-
struction, they were sometimes tilted 20 degrees. The abrupt
appearance of people, dogs and cows crossing the streets
were very common events in India. Moreover, cars trav-
eling on opposite sides of the streets and cars making abrupt
U-turns were all left to fate. Thus, honking the horn was the
only method of alerting others. No one knew where or when
emergencies occur. A cool head and ability to smile under
pressure were essential.2
India was the world’s only leading nation with no defi-
nite policies for reducing traffic accidents. Despite the urgent
need for safety awareness, a stable infrastructure, and strong
traffic regulations, there was little display of these items.
Would it be possible to enter a market with such unpredict-
able elements?
The infinite potential of India was hidden behind
China, to be regarded as second-rate. However, forecasts
showed India will overtake China’s population by 2030 and
its GDP will become 2nd in the world. At present, half of
India’s population was under 25 years of age, and the pop-
ulation increase was potentially 1.5%. Moreover, India had
the best location for distributing to Europe and Africa. In

S0218927515500029.indd 31 30/7/2015 5:01:11 PM

 32  ACRJ

addition, it was rich in natural gas. The government was

actively striving for energy diversification. Also, active poli-
cies for attracting investments were being conducted by the
central and state governments to create a positive invest-
ment environment. Above all, the strength of India was that
English was used as a common language. Since English was
used in all parts of India, business was possible with many
nations. With its infinite growth potential, the entire world
had its eyes on the Indian market. It was difficult to deny that
all these factors turned the chaotic market of India into an
enticing place of business.3

Hyundai Motor India

Located 35 km west of Chennai, Tamil Nadu in Southern

India, the road to Hyundai Motor India’s factory had views
of abandoned lands, poor villages and collapsing schools. In
contrast to such sights, Hyundai India’s factory had a very
modern look. Spread across 2.1 million m², Hyundai Motor’s
factory was built with 7 billion dollars in investment funds
and knocked on the doors of India with 100% wholly-owned
methods — an unprecedented event in India4.
With its need for a new growth engine, Hyundai chose
India as the next region to achieve market penetration in
a short time while carrying forward with globalization. In
1996, India’s domestic automotive market had great poten-
tial to expand alongside India’s economy. It offered a foot-
hold for further exportation. When bringing foreign vehicles
into India, the tax on new cars was 60%, while used cars
were taxed 100%. India’s government created an environment
in which automotive companies could escape the burden of
high taxation by assembling vehicles inside India. Rather than
bring cars into India, it was more advantageous to bring in
the factories to build the cars.
At the time of Hyundai Motor Company’s entry into
India, there were strict restrictions against foreign ownership.
Joint ventures were practically inevitable. Since Indians had a
history of regulating for foreign investment, they were all too
aware of how to gain the most profit from foreign partners.

S0218927515500029.indd 32 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  33

Most multinational corporations entered India in the form of

joint ventures, and the automotive industry was no exception.
Maruti was created as a joint venture with Suzuki. Ford also
possessed shares. However, Hyundai discovered that these
corporations faced discord with their local partners, which
caused a great deal of problems. In fact, Ford suffered much
damage as its factory’s construction was delayed by disputes.5

“As the long-lived unrivaled automotive company in India, Maruti

faced great difficulties in management due to great and small con-
flicts that occurred between Japan’s Suzuki and the Indian govern-
ment. Such differences that can occur in partnerships tended to lead
to difficulties of decision-making. Gradually, bad blood was made
between Suzuki and the Indian government and the time required
for negotiations lengthened. It was a fact that this played the crucial
role for later corporations to take on great amounts of Maruti’s
market shares. This was what Hyundai Motor Company feared as
well. In short, it was not only difficult to bear a partnership with
a local corporation that was favorable to Hyundai from the begin-
ning, but also it was difficult to quickly introduce new technologies
if problems occur during management and this causes concern that
it continue as loss of product competitiveness.”
— Yang-Soo Kim, Former Head of Hyundai Motor India6

For a foreign corporation to favorably conclude a

partnership from the start was a very difficult task. Joint
investments could act as obstacles to implementing firm strat-
egies or making quick decisions. Accordingly, after fulfilling
numerous conditions and making endless appeals, Hyundai
received authorization for independent investment from
India’s government in May of 1996.c In October of the same
year, a ground-breaking ceremony was held, and the factory
was completed in May 1998. In September 1998, the factory
began mass production.7
After considering distribution, human resources, infra-
structure and support policies of the government among
the main automotive clusters around Mumbai, Delhi, and

c Along with the massive production, Hyundai Motor Company got the permission
from the government by proposing over 70% localization of parts within four years
as well as transfer of key technologies to India.

S0218927515500029.indd 33 30/7/2015 5:01:11 PM

 34  ACRJ

Chennai, Chennai of Tamil Nadu was chosen as the place of

investment. The state government of Tamil Nadu provided
the infrastructure for electricity, water, roads and communi-
cation. As well, it purchased the land to support construction
for Hyundai Motor’s factory. With such support, Hyundai
completed the factory in one year and seven months, well
ahead of the planned three years. The history of Hyundai
Motor India began.

India’s Automotive Industry

India’s automobile industry began in the 1930s. The industry

had its earliest beginning when GM and Ford launched
a CKDd assembly line and established the local brand.
However, development was slow due to various regulations
imposed by the Indian government, (including restrictions on
production capacity and high commodity taxes). Moreover,
the Indian government of the 1960s adopted strict industrial
protectionism. GM’s and Ford’s dominance declined as the
oligopoly structure for local enterprises was formed. Never-
theless, various regulations were relaxed in the 1980s due to
the liberalized policies of industrial modernization. When the
Lao administration announced economic liberalization in July
of 1991, the market was opened, and international automobile
companies began their entry into India. Duties for automobile
parts were abolished in 1992, and restrictions on production
were ended in 1997. These relaxations led to renewed inroads
by foreign corporations.7
In this land of opportunity, Hyundai Motor Company
found potential and began its entry into India’s market.
At the time of their decision in 1995, Ford and Honda had
already entered India’s market through collaborating with
local corporations. Suzuki also collaborated with India’s gov-
ernment in 1983 to establish Maruti. Maruti developed the
people’s car to occupying a record 80% of India’s market
share in the late 1990s. During this time, India’s automo-
bile industry achieved outstanding growth. It changed into

dCKD (Complete Knock-Down) means to export in complete parts prior to assembly.

S0218927515500029.indd 34 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  35

an arena of fierce competition between the North American

enterprises of GM and Ford, Japan’s Toyota, Nissan, Honda
and Mitsubishi, the European companies of Volkswagen,
Renault, Mercedes-Benz, BMW and Fiat and their local corpo-
rations of Maruti Suzuki, Tata Nano, Mahindra and others.
One of the distinguishing features of India’s auto-
mobile market was that its vehicle classification was seg-
mented, with small vehicles ranked according to the length of
frames. Thus the 800 cc Mini (under 3400 mm) and 1000 cc
Compact (3401–4000 mm) fell into Segment A, while the Mid-
sizes (4001– 4500 mm) and Executives (4501–4700) of over
1000cc fell into Segment C in the global market classification.
Premium (4701–5000 mm) fell into Segment D while Luxury
(over 5001 mm) fell into Segment E. In other words, although
Sonata was considered as a mid-size vehicle by global stan-
dards, it was considered as a Premium vehicle in India (see
Exhibit 5). Prior to Hyundai Motor Company’s entry, the
market of 800 cc mini vehicles occupied approximately 70%
of the 320 thousand sold in the entire nation. However, the
1000 cc compact vehicle market began to display growth over
twice its size from 1999 due to the new release of Hyundai’s
Santro, and started to supplant a large portion of Segment A’s
market. Since then, India’s automobile market grew larger in
accordance with the developments in the nation’s economic
status.
Recently, the Indian government prepared the Automo-
tive Mission Plan 2010 –2016 for the automotive industry. It
began to prepare standards for vehicles and road traffic safety.
Along with systemized vehicle inspection systems, it adjusted
taxation policies for expanding automobile exports. In partic-
ular, it proceeded to take on the National Highway Develop-
ment Project (NHDP) to expand the percentage of paved roads
from 47.4% and support new automobile technologies with an
R&D center. Finally, it applied the 2010 Euro IV Exhaust Stan-
dardse to reduce air pollution in India as well as increase the
competitiveness of domestically-produced products.

e“Euro” is the exhaust gas regulation introduced by the EU in 1990. On 30 May 2007,
the Council of Ministers officially authorized regulations that further strengthen the
standards for car and truck exhaust gases.

S0218927515500029.indd 35 30/7/2015 5:01:11 PM

 36  ACRJ

Approximately 60% of automobile purchasers in India

were white collar workers in their 20s and 30s. Vehicle use
was being supported by the young generation, and the
purpose of vehicle purchases included increase in social
status, commuting to work, and family. Due to the promo-
tion of automotive loans, vehicle purchases through monthly
installment plans reached approximately 80%.

LOCALIZATION STRATEGY IN INDIA

Development of the Customized People’s Car

HMI initially planned to produce approximately 50 thou-

sand mid-size 5-door Accents during the beginning phase
of its entry into India’s market. However, as a result of
market research, HMI found that the sale of mid-size vehi-
cles remained at 80 thousand, for a maximum value of sales
of 30 thousand, while compact vehicles had potential annual
sales of 60–80 thousand units. At the same time, Daewoo
produced 110 thousand Cielos while targeting the mid-size
vehicle market in India. However, sales stopped at 20 thou-
sand, which led HMI to revise its strategies. Accordingly,
HMI entered India’s market with the Atoz (called the Santro
in India) rather than the Accent.
HMI threatened Maruti’s market share of 82%. During
this time, Maruti enjoyed a seller’s market: it continued
selling the old 1980s models. Based on these conditions, HMI
intended to develop a “people’s car” to suit the climate and
lifestyle of the Indian people. HMI applied new technolo-
gies and components instead of reusing domestic models.
In the Indian car market where compact cars under 1,000 cc
occupied 70% (see Exhibit 6), HMI found its great strength in
small vehicle parts offered a cost-competitive advantage.
The popularity of compact vehicles in India was a
result of tax policies. Compact vehicles included lengths
under 4 m, engines under 1000 cc, or under 1500 cc when
diesel. Other vehicles were hit with a 10% special consump-
tion tax. When lengths or displacements were exceeded, the
tax rose to 22%. Due to these increases, 78% of the population

S0218927515500029.indd 36 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  37

preferred compact vehicles. In addition, it was easier for com-

pacts to weave through India’s congested roads. Moreover,
wealthy people in India tended to buy several vehicles per
household.
To take advantage of such conditions, HMI began
adapting the Korean Atoz to suit India. The Indian people
had not been favorable towards the Atoz. Its rear view
reminded them of an auto-rickshaw, the local taxi cab.f HMI
therefore went through an extensive process to improve the
design to suit the preferences of the Indian consumer. The
functions of the vehicle were also adjusted in consideration
of Indian drivers’ habits. Factors such as lifestyle, climate
and road conditions were considered. For Indians who wear
turbans, the height of the vehicle was increased. The body
was also raised to avoid damage from poor roads and heavy
monsoon rains.g Indians tended to travel short distances at
low speeds while abruptly accelerating when cutting lanes.
Accordingly, the power train was modified and brakes were
strengthened.
The hot and humid weather of India placed a great
load on an engine’s cooling and air conditioning systems.
To handle roads with poor drainage during heavy rainfall,
the vehicle’s water resistance was enhanced.h To deal with
unregulated roads with jaywalkers and sacred cows, the horn
was made louder. The Indian people preferred manual trans-
missions and kept their air conditioners turned on 365 days
a year. Therefore, HMI strengthened these features. Finally,
the car’s name was changed to Santro to indicate this was a
completely different vehicle.i In such a way, HMI considered
the needs of the customers when introducing a new model to
gain their solid trust.8
To promote the new car, HMI recruited India’s best-
loved movie star, Shahrukh Khan, to capture the hearts of
the people. At the time, the nation of Korea and the brand

f Itis a passenger-carrying tricycle made by remodeling a motorcycle.

gIndians call this raised car the “tallboy.”
h The ECU was elevated so it would not get damaged in rainstorms. A waterproof

ECU was developed so that the engine would keep running when the vehicle was
caught in water.
i Santro is named after the French resort of Saint Tropez. It is a partial revision of the

Korean Atoz and the same as the Kia Visto released when Hyundai took over Kia.

S0218927515500029.indd 37 30/7/2015 5:01:11 PM

 38  ACRJ

name of Hyundai were unknown in India. Accordingly,

with Shahrukh Khan as their spokesperson, HMI released a
6-part advertisement for Santro. As a result, HMI succeeded
in fixing the image of Hyundai into the minds of the Indian
people. With full-scale marketing through national road
shows and customer service, word began to spread, and 6
months after its initial release, Santro began to increase sales.9

Building the World That Moves as One

In a corner of HMI’s Chennai factory, there is a place where

a great amount of sawdust is often seen. This is the part of
the factory that produces desks and chairs for public schools.
This section was built inside the HMI factory in 2006.
Under the theme “World That Moves as One,” the
Hyundai Motor Foundation was established for social con-
tributions to India. It contributed 100 rupees for each vehicle
sold by HMI. With this fund, various social programs were
conducted, including the desk and chair program to help stu-
dents in under-developed regions.

“I began working in India in 2003 and in 2004. I began my CSR

(Corporate Social Responsibility) activities to serve the social
responsibilities of the company. First I began looking around our
factory for community development. I decided to donate after vis-
iting the public and private schools and saw that the students were
all sitting on the floor. CSR be seen as cultivating the self-initiative
of Hyundai Motor Company for localization of culture.”
— Han-Woo Park, Head of Hyundai Motor India10

“The social contribution activities of Hyundai Motor Foundation

are the ideal case that displays how Hyundai and the community
have been bound together by the regional citizens. It is rare to find
other foreign corporations in India, or even India’s own large cor-
porations, that conduct long-term and systematic social contribu-
tion activities like Hyundai Motor India. The activities of Hyundai
Motor India and Hyundai Motor Foundation are the ideal case that
help Indian corporations realize the importance of social contribu-
tion activities.”
— S. Ganapathy, Advisor to Hyundai Motor Foundation

S0218927515500029.indd 38 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  39

In addition, HMI provided extensive opportunities for

education to the neglected classes of people. Hyundai Motor
Foundation established and operated automotive training
facilities in India’s major cities to provide opportunities for
young people to acquire skills as engineers and be recruited
by HMI. The company also supported internships and schol-
arships by connecting with specific universities based on
industry-university collaboration.
At the same time, HMI supported scholarships for 200
underprivileged students with excellent academic records
by selecting them as Hyundai Traffic Volunteers. They were
commissioned by India’s traffic management institution
(ROSES) to receive education and become active in traffic
safety campaigns and signal controls in busy regions such as
Delhi and Chennai. The roads of India had serious problems
due to jaywalkers and vehicles traveling on the wrong sides
of the streets. To overcome such issues while enhancing the
growth of India’s education, HMI provided monthly scholar-
ships of 1650 rupees 3 hours a day to help reduce traffic acci-
dents through traffic campaigns and establishing a “traffic
order” culture among the citizens.

Building Trust with the Indian People

The Indian state government objected to Hyundai Motor

Company’s highly automated production, since it offered few
jobs. To overcome this objection, Hyundai hired 3,700 local
employees in the production line at the Chennai factory. This
was unlike the Ulsan and Asan factories in Korea, where 80–
90% of operations were automated (see Exhibit 2). In general,
HMI provided employment to over 5,000 Indians, making it a
significant local employer.
In addition to jobs, HMI were influential to the culture
of local Indian citizens. A tropical monsoon climate, an agri-
culturally-oriented traditional society, a caste system, Hin-
duism and the remnants of English colonialism combined
to produce a people who were soft-hearted, submissive and
gentle. Such characteristics appeared in displays of giving in
to authority but also in work places due to lack of loyalty

S0218927515500029.indd 39 30/7/2015 5:01:11 PM

 40  ACRJ

towards the company and lack of desire to achieve a goal.

It also appeared in tendencies of being irresponsible due to
fatalistic attitudes. During HMI’s startup, Indians displayed
low physical strength and high rates of absenteeism. There
were also examples of exclusive attitudes due to strong status
awareness (see Exhibit 7).
HMI therefore focused on personnel management
to give employees a sense of ownership. For production
workers, the highest level of education was restricted to
technical high school graduates. For general administrative
workers, young university graduates were recruited. HMI’s
greatest competitive advantage was in selecting manpower
from among the mild and gentle southern Indians. Workers
at the HMI factory enjoyed higher wages than other Indians.
Such wages and the new relations within the factory neutral-
ized the traditional caste system. Differences in religion and
status were still respected in important matters such as mar-
riage, but they had no significance within the walls of the
factory. Instead, a new ranking was formed according to the
evaluation standards of the company.11
By applying the cognitive structure of locals that cling
to the caste system, HMI revised the method of managing
human resources. By maintaining high payroll standards, it
managed local employees through in-depth site management
and education in consideration of local sentiment. In partic-
ular, positions in each field were designated so that Koreans
and Indians would share in the work. In the long-term, there
were plans for all work to be performed by locals.j Along
with those mentioned, HMI strove to take preventative mea-
sures for resolving labor-management relations and collabo-
rating with the supplier to share success.

“It was not easy to work and live with unfamiliar employees in
an unfamiliar place. At times I faced messy situations. One of the
funniest episodes was the dining-out culture of Indians. In Korea,
employees tended to grow closer together while dining out, but
in India they said they felt further apart after dining together. The
caste system and religious differences were probably the main

jKorean resident employees have roles as coordinators rather than in production.

S0218927515500029.indd 40 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  41

reasons. In these situations, the Sudra and Vaisya class never sit
together, and since the Hindu and Islam have great differences in
food cultures, they felt it was too difficult to associate.”
— Yang-Soo Kim, former head of Hyundai Motor India

Although such situations seemed unfamiliar at first,

Kim rememberd the efforts to understand and adapt to their
customs. To show that he was no different from the Indian
employees, he ate Indian food in the Indian way and strove
to understand the religious differences and focused on
staying neutral. It was undeniable that the key to Hyundai’s
success in India was due to such humanistic efforts.
Meanwhile, the Japanese auto companies faced great
difficulties in India. In particular, Toyota’s joint corpora-
tion, Toyota Kirloskar Motors (TKM) suffered from compli-
cations due to local labor unrest. Although Toyota Motors
was famous for zero strikes in Japan, these strikes were con-
tinuous since its entry into India’s market. The employees
at Karnataka in central India went on strike the day after
3 employees were fired. Of the 2,350 personnel of TKM,
approximately 1,550 were members of the labor union. These
people destroyed CCTVs inside the factory and threw rocks
at passing cars. TKM’s union struck due to conflicts over
wages as well as emotional issues such as defiling the Indian
flag. Honda Motor’s base in India also went on strike over
wages, causing damage of 57 million dollars. When TKM
acted aggressively by dismissing 3,500 workers, the union
members blocked the road from Gurgaon and staged a
violent protest.
In 2011, HMI officially established the United Union
of Hyundai Employees (UUHE). As the initial labor union
of HMI, the organization strove to build cooperative and
rational labor-management relations. As a result, there were
no conflicts with labor. However, there did appear to be
movements from an unrecognized organization, Hyundai
Motor India Employees Union (HMIEU), which was
attempting to shake down the official labor union and the
company. Therefore, the official union attempted to improve
relations with HMIEU.

S0218927515500029.indd 41 30/7/2015 5:01:11 PM

 42  ACRJ

STANDARDIZATION STRATEGY IN INDIA

Speed Battle, Speed Management

As competition grew more intense, Hyundai Motors began

to battle for survival. The main battlefield moved from
the massive markets of the US and Europe to the emerging
markets of China, India and Russia. The “speed manage-
ment” of Hyundai in India and China was extraordinary. The
term “Hyundai Speed” became a watchword of how Hyundai
Motor Company did business.

“HMI completed the 2nd factory within 10 years after the completion
of the 1st factory in 1998. It constructed a solid foothold from which
to grow into the major automotive company equipped with a produc-
tion capacity for 600 thousand vehicles. Specially, completion of the
second factory in India held great significance in that Hyundai Motor
Company solidified their position in India quickly while preparing the
foothold for cultivating as the production base of global compact cars.”
— Mong-Ku Chung, CEO of Hyundai-Kia Motors,
Congratulatory Address for the Second Factory in India

On 2 February 2008, HMI cut the ribbon to its second

factory in Chennai, Tamil Nadu in Southern India. In atten-
dance were President Mong-Ku Chung of Hyundai-Kia
Motors and major figures of India’s government including
Prime Minister M. Karunanidhi, along with 1,200 employees.
With a total of one billion dollars invested, the second factory
was able to manufacture 300 thousand vehicles annually.
Built on approximately 176 thousand m² of land, it would be
the exclusive factory for the i10, the compact car released in
India. HMI planned to produce and sell 125 thousand i10s
in both domestic and foreign regions, for an annual total of
250 thousand vehicles. As the next generation compact car of
Hyundai Motors, the i10 would be produced in India to be
exported to 90 countries in Europe, Africa, and the Middle
East as well as Central and South America. In other words,
with the construction of the second factory, HMI expanded
its foreign as well as domestic sales of compact cars. In such
ways, HMI came to possess the annual production capacity of
600 thousand vehicles in India.

S0218927515500029.indd 42 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  43

Since 2004, Hyundai has made its Indian factory the

main base of global production and cultivated it as the
advanced base for third world exports. As an emerging
market of immense potential alongside China, Russia and
Brazil, the nation of India developed at great speed. With
pursuit of the FTA, its strategic significance increased to make
it the economic leader in the third world. Therefore, Hyundai
Motors decided to use the Indian factory as the export base
for emerging nations and executed plans increase inventory
for factory operations. This soon led to maximum sales and
profitability. In accordance with headquarters’ global strategy,
India became the axis in building a global production system
for Hyundai. In 2010, it served as outpost for successfully
entering the “Global Top 5.”
With the construction of Hyundai Motor Company’s
second factory in India, the number of accompanying sub-
contractors increased from 16 companies to 43, with Sejong
Industrial Corporation and Hanil Tube. With this, HMI was
able to secure both a stable parts supply and quality com-
petitiveness at 90 percent of the local rate. At the same time,
the subcontractors gained opportunities to expand to foreign
regions and find opportunities to advance in combined
operations.
In addition to the second factory, HMI established a
research institute within the Chennai district in 2009. With
over one thousand technical personnel, the Hyundai Mobis
R&D Center, along with the research institution in Beijing,
became the key to supporting foreign production of Hyundai
automobiles. The R&D center took full responsibility for
developing engines and transmissions to be installed on
Hyundai’s vehicles for Southeast Asia and Europe. Hyundai
established these local R&D centers in India and China to
secure independent technology quickly which was demanded
by the host nations at the time of giving permission to
construct the local factories.
HMI rapidly succeeded in acquiring the image of a
national corporation that contributes towards the economy
of India. It was the Number One exporter of automobiles,
responsible for over 65% of India’s entire automotive exports.
Continuing its growth since entering India’s market, HMI

S0218927515500029.indd 43 30/7/2015 5:01:11 PM

 44  ACRJ

set a new record in March 2006, with one million vehicles

(domestic/export) produced and sold — the shortest time
in India’s automotive history. This record was broken in
September of 2007, with 1.5 million vehicles produced and
sold. All these achievements were linked with the speed
management of CEO Mong-Ku Chung.12

Quality Management, Produced on Site

The image of Hyundai Motor Company changed beyond

recognition in the last 1 to 2 years. It was actually a vertical
climb for the company and not just in quantity of sales. In
recent times, the favorable reviews increased. One could say
that the “green light” was lit to become the world’s auto-
mobile maker. Such rewards for Hyundai Motor Company
were based on the quality management which was vital for
the company to build the “car worth its price” rather than a
“cheap car.” This strategy of CEO Mong-Ku Chung reached
its mark. Increases in quality led to increases in sales as well
as increases in brand image. Ultimately, a virtuous cycle was
formed to make mutual increases. As President Toshiyuki
Shiga of the Japan Automobile Manufacturers Association
stated,
“I believe that the fast development of Hyundai Motor
Company was the victory of quality. Hyundai Motors
quickly enhanced their quality.”
Along with Kia Motors, Hyundai Motor Company
strove to construct production systems for 5 million vehicles
in domestic and foreign regions (3 million domestic, 2 million
foreign) and enter the Global Top 5. Such ambitious goals
were no longer dreams. Hyundai reached beyond the BRICs
to move towards Europe and US, the home of automobiles, to
be led by “global management” and pushed by “quality and
brand management” in moving closer to their goal.
This increase of Hyundai Motors was also due to thor-
ough on-site management of CEO Mong-Koo Chung. The
evaluation that his on-site management, taken after the late
honorable president Ju-Young Chung, built the Hyundai

S0218927515500029.indd 44 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  45

Motors of today. Needless to say, Chung was famous for

engaging on-site management in both domestic and foreign
business sites. When he was in Korea, he visited production
sites and front lines of business 2 to 3 times a week to inspect
conditions and order improvements. He also paid great atten-
tion to foreign site management as well. Chung made over 13
foreign business trips a year and traveled to the US, Turkey,
the Czech Republic, Russia and China to handle matters with
his own hands. India was a foreign market to which Chung
expressed particular attachment. It had the only factory
among the six foreign factories (Exhibit 8) that made steady
profits. While starting his global on-site management every
year, he chose India as his first destination. During his visit
to the Chennai factory and the construction site of the R&D
center, CEO Mong-Ku Chung told the following to Hyun-
Soon Lee, the head of R&D and the local employees:
Since India’s market is rising as the most ferocious bat-
tlefield of the automotive industry, do not loosen your
tension! India is our outpost and we have to secure tech-
nologies that can shut out our competitors. Ultimately, it is
battle for quality!
The quality management style of Hyundai’s CEO
Mong-Ku Chung merged into the management of India’s
market. Ultimately, it brought extraordinary results in the
automotive industry that can only be described as being
“more intense than a car race.”

THE FUTURE OF HYUNDAI MOTOR INDIA

The total number of vehicles exported by HMI exceeded 1

million on March 22nd 2010.13 This was a first for the Indian
automotive industry. With the advantages of low distribu-
tion and labor costs (see Exhibits 9, 10, 11), HMI consistently
played the role of outpost for export of compact cars such
as the Santro, i10 and i20. In 2009, sales increased by 14.4%
over the previous year with 289,846 domestic vehicles and
277,000 exports, occupying 66% of India’s entire automotive
exportation.

S0218927515500029.indd 45 30/7/2015 5:01:11 PM

 46  ACRJ

Moreover, the exports of foreign factories began to

surpass the domestic factories.k Vehicles from factories in
India, China, the US and Turkey recorded consistent increases
since the beginning of operations at the Chinese factory in
2003. In particular HMI’s exports as a share of overall sales
rose from 35% in 2004 to 49.9% in 2008, 48.2% in 2009 and
66% in 2010. At present, vehicles were being exported to
110 different nations in Europe, Africa and South America.
Since 2010, there were plans to export the i20 to 10 nations,
including Australia.14

“Achieving 1 million vehicles in exportation served as a significant

milestone and pride to the global management of Hyundai Motor. We
had plans to consistently expand the exporting regions to strengthen
our status as the exporting base of mid-size and compact cars.”
— Han-Woo Park, Head of Hyundai Motor India
Commemorative Ceremony for Achievement of
1 Million Vehicles in Exports15

However, there were problems with expansion of edu-

cational facilities due to unstable politics. The nation of India
was especially unsuitable for stable markets because the
system was greatly influenced by the government. In other
words, there was always uncertainty. Recently, India abruptly
removed the gasoline subsidy as an energy reform policy but
decided to maintain diesel subsidies. Although the action
seemed designed to promote the growth of Tata, the Indian
company that makes diesel engines, the Indian government
claimed that the removal was to diversify energy by reducing
gasoline vehicle use.
These days, India’s Big 3 automotive brands of Maruti-
Suzuki, Hyundai and Tata further intensified competi-
tion by releasing new compact mid-size vehicles, which are
the most popular units in the Indian market. Meanwhile,
Toyota and Honda chose a top-down strategy with mid/

kHyundai Motor’s annual production capacity of overseas factories is forecast

to increase from 2 million in 2011 to 2.5 million in 2013 (900 thousand in China,
600 thousand in India, 300 thousand in the US and Czech Republic, 150 thousand
in Russia, 100 thousand in Turkey), to be substantially greater than its domestic
factories.

S0218927515500029.indd 46 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  47

luxury sedan selections to occupy the premium position in

the Indian market. Also, Volkswagen became partners with
India’s number one producer, Maruti-Suzuki, to promote
strong changes for compact cars and diesel engines. In addi-
tion to all this, the 1st place ranking of Maruti-Suzuki was
threatened by battles with advanced corporations including
GM, Ford and Fiat. Maruti-Suzuki had a 50% market share
in 2010, which declined to 43% by June 2011. With the intro-
duction of Chinese automotive corporations, the automotive
industry in India were dubbed the Warring States Period (see
Exhibit 12).16
On 13 October 2011, HMI revealed its new compact
car, the EON, to an audience of 700 VIPs at the Dreams
of Kingdom in Gurgaon near New Delhi.17 In his opening
speech, Seung-Tak Kim, the chairman of overseas operations,
stated that “applied with cutting-edge technology, EON was
created by the hard work of one thousand technicians per-
forming for the past four years.” He added that “EON was
created with considerations for the demands of Indian con-
sumers and anticipated to captivate our customer’s hearts.”
With an engine displacement of 800 cc, EON was targeted
towards young people in urban districts, householders in
rural districts, and new customers buying cars for the first
time after riding motorcycles.l EON was developed after
investing $2 billion for the purpose of overtaking India’s best
seller, Maruti-Suzuki’s Alto. Thus there were no plans to sell
it anywhere else but India. During this night, Hyundai also
announced that HMI would release 10–15 new and modified
vehicles to the Indian market.18 From the recently released
compact EON to the luxury SUV Santa Fe, there were plans
to face the new vehicles of competitors by developing models
to win the hearts and minds of Indian consumers in various
ranges. Moreover, HMI planned to produce new vehicles
using diesel engines due to the price differences caused by
India’s increase in gasoline prices. In accordance with the
energy policies of the Indian government, the production of

l EON is expected to have a price between 270 to 372 thousand rupees, depending on

options. 95% of the parts have been obtained from local regions to increase procure-
ment by 10% over i10 and lower the production costs by using low-priced parts with
simplified functions for air conditioning and sound.

S0218927515500029.indd 47 30/7/2015 5:01:11 PM

 48  ACRJ

new cars using LP and CN gas were also under consider-

ation. However, problems that remain unresolved included
sustaining the growth of existing brands, cultivation of luxury
brands, securing future competitiveness, and resolving labor
and management issues.19
The global automotive market survived the worst
situations in India’s automotive market, a situation akin
to standing on the edge of a knife. With the entry of Volk-
swagen-Suzuki and the aggressive rise of the Chinese auto-
motive industry, the apprehensions of HMI’s Han-Woo Park
deepened. Should HMI continue focusing on compact cars or
introduce mid-size to premium and luxury sedans? Should
it follow the headquarters’ strategies and have the Indian
factory serve as the outpost for global compact cars, or should
it focus on satisfying the domestic market? In a situation of
fierce competition where only survival or extinction exists,
Han-Woo Park sat in the Hyundai pavilionm, lost in thought,
wondering about the future of Hyundai Motor India and
where it will be headed.

SOURCES

1. Hyundai Motor Company, http://www.hyundai-motor.com.

2. Young Hyundai, http://young.hyundai.com.
3. Shim, N. S., 2004. India’s Growth Potential and Measures for
Expansion. Industrial Research Team, Institute of Trade Research.
4. Hyundai Motor India, http://www.hyundai.co.in.
5. Ha, Y. M. and Cha, T. H., 2002. Hyundai Motor Company and
India. Korean Business Review, 5:2.
6. Lee, S. C., Chung, J. W., Choi, Y. J. and Oh, M. A., 2006.
Management Realities and Localization Strategies of Korean
Corporations Entering India. Korea Institute for International
Economic Policy.
7. Yoon, D. J., 2001. Hyundai Motor Company’s Strategies to
Enter India, Difficulties and Their Conquest. Korean Academy of
International Business.

m Inside the Chennai factory there is a garden, a farm to raise animals, and a pavilion
called the “Hyundai Pavilion” for employees to rest.

S0218927515500029.indd 48 30/7/2015 5:01:11 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  49

8. Kim, J. S. and Cho, M. K., 2005. Developing the People’s Car of

India. KBS Current Affairs.
9. Lee, S. Y., 2001. Successful Story of Hyundai Motor in India’s
Market. Motor’s Line, July.
10. Park, H. W., 2011. Interview for India Foreign Symposium by
Korean Academy of International Business.
11. Kim, M. S., 2011. Interview.
12. Fortune Korea, 2011.
13. Moon, H. M., 2010. Hyundai Motor Exports: Overseas Factories
are Overtaking Domestic Factories. Newspim Economy.
14. Moon, H. M., 2004. Theme Project. Hyundai Motor Global
Management 1–12, edaily News.
15. Lee, C. H., 2010. Hyundai Motor’s Success in India: Recording
1 Million Vehicles in Exports. Korea Herald Business.
16. Korea Automotive Research Institute, 2011. Automotive Industry.
17. Yoo, C. H., 2011. Hyundai Motor India Releases New Car, EON.
Yonhap News.
18. Yoo, C. H., 2011. Hyundai Motor India to Release 15 New Types
within 5 Years. Yonhap News.
19. Park, H. W., 2011. Interview.

S0218927515500029.indd 49 30/7/2015 5:01:12 PM

 50 ACRJ

Exhibit 1

History of Hyundai Motor India

Date Contents
May 1996 Establishment of Hyundai Motor India (HMI)
December 1997 Factory Ground-Breaking
Factory Completed (17 months consumed)
May 1998
Santro Test Car Production & Sales (October)
October 1999 Opening Sales of Accent
April 2000 Achievement of 100 Thousand in Annual Production/Sales
July 2000 Export of Santro
March 2002 Begin Extension for Factory to Produce 150 thousand Vehicles
Full-Scale Operation for Export Strategic Base
March 2003
(Exportation to Central & South America, Europe)
Promotion for 2nd Factory Construction in India
February 2005
(Goal to construct 600 thousand vehicles annually by 2007)
Achievement of 200 thousand exports
October 2005
(Achieved 5 years and 10 months after the Nepal export in December 1999)
Released New Generation Compact Car i10,
October 2007
Ranked No. 1 for India’s Customer Satisfaction
April 2009 Completion of Hyundai Mobis R&D Center, Use of Local IT Talents
August 2010 Reached over 3 million vehicles in sales
December 2010 Reached 600 thousand in Production/Sales as First in India’s History
September 2011 Release of New Compact Car, EON

S0218927515500029.indd 50 30/7/2015 5:01:12 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  51

Exhibit 2

Organization of Hyundai Motor India

Source: Hyundai Motor India (HMI).

S0218927515500029.indd 51 30/7/2015 5:01:15 PM

 52 ACRJ

Exhibit 3

Corporate Automobile Sales for 2011 (unit: 10 thousand, %)

Note: ( ) is the increase rate compared to previous year.

Source: Results Announcement Data and Media Reports of Each Company (Data Analysis, Retrieval and Transfer System
of the Financial Supervisory Service for Hyundai-Kia Motors), Korea Automotive Research Institute (KARI).

S0218927515500029.indd 52 30/7/2015 5:01:16 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  53

Exhibit 4

Worldwide Automobile Sales for 2011 (unit: 10 thousand, %)

Note: ( ) is the increase rate compared to previous year.

Source: Ward’s, Association of European Entrepreneurs, Automobile Manufacturers Association of
Each Nation, Korea Automotive Research Institute.

Exhibit 5

Vehicle Classification Comparison Between Global and Indian Markets

Global standard Korea standard India standard

A, B Segment – Mini – (Up to 3400 mm)
Small car Compact (3401– 4000 mm)
C Segment Mid-size car Mid-size (4001–4500 mm)
Executive (4501–4700 mm)
D Segment Quasi large-size car Premium (4701–5000 mm)
E Segment Large car Luxury (5001 mm & above)

Source: Hyundai Motor Company.

S0218927515500029.indd 53 30/7/2015 5:01:16 PM

 54  ACRJ

Exhibit 6

Sales Per Vehicle Class in India for 2011 (unit: 10 thousand, %)

Source: Society of Indian Automobile Manufacture (SIAM), Korea Automotive Research Institute (KARI).

S0218927515500029.indd 54 30/7/2015 5:01:16 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  55

Exhibit 7

Characteristics and Appearances of India’s People

Division Characteristics Appearances Efforts

Weak physical High absentee rate, lack Clear orders, consistent
Physical Features
constitution of time awareness training of goal awareness

Focuses on influences of Closed to other classes, Emphasize corporate

Caste System
caste system
Strong awareness for
Religious Influences
world of transmigration
Coexistence of obedience
and disobedience due to
Task Management
long-term colonial
lifestyle
Poor English for most
Communication
workers
Traditional society
Emotional Characteristics
surrounding agriculture
Source: D J Yoon 2002. Hyundai Motor Company’s Strategies to Enter India, Difficulties and Their Conquest. Korean
Business Review. 5:2.
low unity image with fair treatment
Educate awareness for
Sincere but lacks will
responsibilities and goals
for goal achievement
through various awards
Obeys authority but
has strong tendency to Thorough mid-inspections
avoid responsibilities
Gather opinions through
Direct communication
suggesting systems and
through local managers
discussions
Emotionally sensitive
Emotional consideration
and easily offended

Exhibit 8

Overseas Production by Hyundai (unit: %)

Company 2009 2010 2011 Share Growth

Hyundai India (HMI) 559,620 600,480 619,785 28.2 3.2
China (BHMC) 571,234 704,441 743,888 34.1 5.6
US (HMMA) 195,559 300,500 338,127 15.6 12.5
Turkey (HAOS) 48,640 77,000 90,231 4.2 17.2
Czech (HMMC) 18,022 200,088 251,146 11.6 25.5
Russia (HMMR) – 217 138,987 6.3 63,949.3
Total 1,493,075 1,882,726 2,182,164 100 15.9
Note: This data shows only Hyundai’s overseas production except Kia’s data Hyundai acquired Kia Motors in
1998.
Source: Korea Automotive updated by Korea Automobile Manufacture Association, 2012.

S0218927515500029.indd 55 30/7/2015 5:01:17 PM

 56  ACRJ

Exhibit 9

Costs of Manufacturing of HMI (unit: euro, %)

Nation Compact car’s total production cost Wage cost Ratio of wage cost
India 4,000 150 3.8
Korea 4,600 750 16.3
East Europe 5,000 1,150 23.0
Note: Beginning wage in Chennai is from 100 to 200 dollars. This is equal to the salary of US workers for 2 days. Living
cost is also lower than Ho Chi Minh City in Vietnam and Decca in Bangladesh.
Source: HMI.

Exhibit 10

Production Cost-based Price Comparison of Compact Cars in India (unit: Rs, dollar)

Company Car Model Indian Rupee USD

Suzuki Maruti Maruti 2,00.000 4,200
Hyundai i10 3,70.446 6,900
(HMI) Santro 3,58.354 5,500
EON 2,74.821 5,700
Tata Tata Nano 1,00.000 2,100
Toyota Etios Liva 4,33.368 9,000
GM (Chevrolet) Beat 3,72.761 7,800
Ford Figo 3,81.800 8,000
Volkswagen UP 3,50.000 7,000
Honda Brio 3,99.000 8,200
Bajaj (Renault) Bajaj RE60 1,00.000 3,000
Source: www.cardekho.com (auto portal in India).

S0218927515500029.indd 56 30/7/2015 5:01:17 PM

 HYUNDAI MOTOR COMPANY IN THE INDIAN MARKET  57

Exhibit 11

Revenue and Cost of HMI (unit: Rs, %)

Content 2010 2011 Percentage change

Revenue Indian market revenue 11,243 13,586 20.8
Export revenue 9,629 7,407 −23.1
Cost financial cost and Interest 97 45 −53.7
Production cost and etc. 18,857 18,304 −3.0
Source: Korea Automotive Research Institute (KARI).

Exhibit 12

Sales Per Corporation in India (unit: 10 thousand, %)

Company 2007 2008 2009 2010 2011 Increase rate Market share
Suzuki Maruti 71.1 69.8 83.7 106.6 99.7 −6.4 39.6
Hyundai
20.0 24.5 29.0 35.7 37.4 4.8 14.8
(HMI)
Tata 22.1 23.1 26.0 34.2 35.0 2.3 13.9
Mahindra 11.8 12.1 15.0 17.2 22.6 31.4 9.0
Toyota 5.4 5.3 5.4 7.5 13.6 82.1 5.4
GM 6.0 6.6 6.9 11.0 11.1 0.6 4.4
Ford 3.9 2.9 2.9 8.4 9.6 14.8 3.8
Volkswagen – – 0.2 3.3 7.8 140.3 3.1
Honda 6.0 5.4 6.2 6.3 4.8 −24.4 1.9
Source: Society of Indian Automobile Manufacture (SIAM), FOURIN.

S0218927515500029.indd
View publication stats 57 30/7/2015 5:01:17 PM