Hyundai Plans Luxury Foray Into China in Bet Tensions Will Cool

  • Korean brands have suffered backlash in China over Thaad issue
  • China objected to Korea hosting U.S. missile-defence system

South Korea’s Hyundai Motor Co. is planning to bring its Genesis luxury brand to China, possibly as early as next year, in a bet that current tensions between the two countries over a missile-defense system will blow over.

Hyundai has formed a task force to study introducing Genesis to the automaker’s biggest market, Manfred Fitzgerald, who heads the brand, said in an interview at the Shanghai motor show on Wednesday.

“We are constantly on boarding and constantly growing the team,” he said. “We are looking at entering very soon into China. It could be next year. If we come to any kind of market, we come with the entire portfolio.”

Manfred Fitzgerald. Photographer: Mark Kauzlarich/Bloomberg

Manfred Fitzgerald.

Photographer: Mark Kauzlarich/Bloomberg

Hyundai and its affiliate Kia Motors Corp. are battling against negative sentiment in China emanating from South Korea’s decision to host a U.S. missile-defense system, which China opposed. In March, Hyundai and Kia’s combined sales in China plunged by 52 percent as some quarters in China called for a boycott of Korean products over the planned deployment.

Unlike in past years where Hyundai Motor’s stand was mobbed by fans eager to catch a glimpse of their favorite Korean actor or Chinese celebrity, the scene at the two carmakers’ booths were more subdued this year, without the barricades and ranks of uniformed security personnel standing watch.

Three years ago, actor Kim Soo-hyun, who played the lead role of a stranded alien in the hugely popular drama serial “My Love from the Star,” had to cancel his morning appearance at Hyundai’s booth at the Beijing car show because of concerns over crowd control. Kim eventually made an unannounced stop at the stand in the afternoon.

New Models

At the Shanghai show on Wednesday, Hyundai displayed the new China-exclusive ix35, on sale at the end of the year, and has plans to introduce six eco-friendly cars in the near-term in China, according to Beijing Hyundai Motor chief Chang Won-shin. Kia unveiled a China-specific compact SUV, the K2 Cross, on sale in the second quarter.

“Hyundai sees the business environment in China getting better soon,” Chang said without elaborating.

Though the political spat hurt its sales and production directly in March, the company was also caught out by a broader shift in consumer preferences away from sedans to roomier SUVs. Hyundai has grappled with competition from Chinese brands rolling out cheaper models as well as Japanese, American and German brands providing heavy discounts.

“The Thaad issue has most likely had an impact on consumer demand and dealer confidence, but the key issue is the Koreans haven’t been able to establish brand positions like they have elsewhere in the world,” said Robin Zhu, an auto analyst at Sanford C. Bernstein in Hong Kong. “Their lack of SUVs was a contributor to the latter too.”

Hyundai’s new small SUV may become a barometer of its sales rebound in its biggest market, where its fifth plant in China is scheduled to open later this year. Hyundai’s SUVs -– ix25, Tucson, and Santa Fe -- accounted for 22 percent of its sales in China last month, trailing the industry average of 40 percent.