Michel Kaim
Managing Director
Hyundai
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View from the Top

Strong Contender Unfazed by Market Contraction

Sat, 09/01/2018 - 12:24

Q: What are your top goals as the new Managing Director of Hyundai Motor de México?
A: Hyundai operates based on three pillars that are the bases of our strategy: commitment, quality and customer service. We have an obligation to our stockholders and our distribution partners to make our business profitable. But, at the same time, our biggest commitment is to our customers and to Mexico in general. Although we have only four years selling vehicles under the Hyundai brand, our investments in the country go back 30 years. We opened our first manufacturing plant in 1989 in Tijuana as Hyundai Translead and today this site employs 7,500 Mexicans. Many of our subsidiaries have now invested in Mexico, including Hyundai MOBIS and Hyundai GLOVIS, two vehicle brands and a final-assembly plant in Pesqueria, Nuevo Leon.
In terms of quality, all brands try to support their customers but few can do it for five years. We are so confident about our product offering that we provide five-year bumper-to-bumper warranties and even protect the vehicle’s tires even though we do not manufacture them. This also links to our goals regarding customer service. We are a new brand in the market and we selected our dealership network based on the quality they could provide in sales and aftersales operations. Rather than partnering with aggressive distributors, what we wanted was a distributor that could create a unique sales experience.
We have been ranked three times in terms of customer service and the lowest score we have received is fourth place. Our best year we were ranked in second and in 2017 we took third place. We have remained among the Top 5 players in the market for three years and we are always trying to innovate to offer an excellent client experience both in the dealership and through our digital channels.
Q: How is Hyundai dealing with the current contraction in domestic sales?
A: We expect 2018 to be a difficult year. Domestic sales have contracted since the second half of 2017, resulting in an overall drop of over 8 percent. Having said that, Hyundai has managed to grow over 20 percent and we think 2018 will be an excellent year for the brand. Our initial goal for 2018 was to sell 55,000 units and we remain on track.
We are still in a growing phase. We realized there was demand for our vehicles in areas where we were not present so we opened new dealerships to be close to our clients. At the same time, we have grown our representation in the different market segments competing in Mexico. In 2017, we covered 55 percent of all market segments with our portfolio. After the introduction of Accent, Ioniq and the seven-seater version of Santa Fe, that rate grew to 80 percent.
Q: Which models will drive Hyundai’s growth in this challenging environment?
A: Based on how the Mexican market behaves and the expectations we have for its future development, we think Creta is a key vehicle for Hyundai. This was our best-selling model in 2017, with over 11,500 units of the total 46,500 we sold. Creta competes in the small SUV segment, which was previously nonexistent in Mexico but now has the highest growth rates in the country.
Accent has also become a strong contender in the country. This model targets the B segment, which in Mexico represents approximately 30 percent of total domestic sales. Just by participating in this segment, this model has been a great success for the brand. Together, Creta and Accent represent close to 35 percent of our total sales. In June 2018, we also launched Starex as our bet on the cargo segment. This is a 100-percent utilitarian vehicle and we hope to see great results both in the cargo and passenger markets.
Q: What is your position on vehicle ownership and how it will impact sales in the near future?
A: Although there is a shift in consumer preference, we still see ownership as an important factor driving sales in the country. We do think ownership will gradually become less important for clients but so far it is not a risk for the brand. Still, we have an attractive offering for car-sharing companies and ride-hailing drivers who have contributed greatly to our sales results.
Q: What role does digitalization play in your marketing and sales strategy?
A: Digitalization is increasingly important for the client. We have tried to integrate this trend into our operations and provide our dealerships with the right tools to support clients digitally. Previously, sales people had to do an online search to find Hyundai’s rankings in terms of satisfaction and safety. Now, they all have that information available through software engineered by the company. Beyond providing a faster response to clients’ inquiries, this has also helped to increase customer satisfaction. Potential buyers find the right support from our sales-floor advisers and even if they are not around, clients can consult the information by themselves in a friendly format.
Hyundai also strongly supports digital marketing because we know clients conduct their research online before visiting a dealership. We integrated a new tool called Hyundai Live, where clients can watch a livestream of someone at the dealership showing the vehicles and highlighting their features and capabilities. Potential buyers can even interact with this person, which means they no longer have to visit the dealership to resolve specific inquiries. The sales person can use a camera to show clients the inside of the vehicle and provide a much more complete first impression of the vehicle.
Q: As the industry moves toward a digital future, what will be the role of distributors regarding digital sales?
A: We already have the capacity to sell our vehicles digitally but always through a dealership. For Hyundai, distributors will still play an important role in our value chain, not only in terms of sales but in the customer satisfaction they can provide. Someone has to attract clients to our vehicles and offer all the information to make an informed purchase and that will be our distribution network.
Q: What is Hyundai’s vision regarding electrification and the introduction of alternative motorization?
A: There is a global trend toward greater fuel efficiency and that has favored Hyundai thanks to its focus on sustainability and performance. Our internal combustion engines have improved drastically compared to our technology from 10 years ago but we have also delved into new motorization schemes including hybrid and fuel-cell technologies.
In Mexico, we are already marketing Ioniq as our hybrid alternative. As a company, we think full-electric models are not an end solution due to the pollution problems related to energy generation and battery disposal. Approximately 80 percent of the electric energy in the world is still produced with fossil fuels, which means that an electric vehicle still pollutes even if it does not use gasoline. Our bet is on hybrid units and even fuel-cell powertrains as the cleanest alternatives.
Q: Overall, what is your projection for the industry and how do you expect sales to behave by the end of 2018?
A: There is still much uncertainty. The market is in a downward trend that will be impacted by how the political and economic environment evolves. Mexicans will continue to buy cars but we still expect further contraction for the rest of the year, at least in certain segments. The luxury market, for example, has enjoyed years of continuous growth and the uncertainty of 2018 has not really affected it.