Hyundai plans India SUV rollout as domestic competition mounts ahead of IPO

Hyundai Motor, which has long held the position of the most successful foreign automaker in India, is now aiming to reclaim market share from its increasingly competitive domestic rivals. The company plans to do this by introducing a series of new SUVs, coinciding with its preparations for a USD 3 billion initial public offering in the country.

The SUV lineup expansion will commence with the launch of Hyundai's first India-manufactured electric vehicle in early 2025. Following this, the company intends to release at least two gasoline-powered models specifically designed for the Indian market, with launches scheduled from 2026 onwards, according to three sources familiar with the company's strategy.

This approach of expanding its higher-margin product offerings, pursued in conjunction with Hyundai's first-ever stock listing outside of South Korea, reflects the company's optimistic outlook on India's automotive market, which ranks as the world's third-largest. This strategic move comes at a time when Hyundai's presence in China is diminishing and sales in its home country are on the decline.

Historically, Hyundai's sales figures in India have been second only to those of Maruti Suzuki. However, the competitive landscape has undergone rapid changes in recent years. Domestic giants such as Tata Motors and Mahindra & Mahindra have been eroding Hyundai's market share by introducing new SUV models. These SUVs have become the most sought-after vehicles, supplanting the once-popular small cars.

This shift in consumer preferences has led to a decrease in Hyundai's Indian market share, which has fallen to 14.6 per centfrom 17.5 per centfour years ago. In contrast, Tata's market share has seen a dramatic increase, nearly tripling to 14 per centover the same period. Toyota, the next largest foreign competitor, has also seen its share grow from 4 per cent to 6 per cent.

Industry consultant V G Ramakrishnan, managing partner at Avanteum, comments on Hyundai's situation: "Hyundai is in a challenging position. Its primary focus should be on maintaining market share, and the only way to achieve this is through a more rapid product launch strategy."

Hyundai's plans for electrification in India are ambitious. Following the introduction of its India-made electric SUV in 2025, the company intends to launch four more EVs by the end of the decade.Hyundai is evaluating plans to transform India into a regional export hub for electric vehicles, according to the three sources who spoke on condition of anonymity.

In line with its broader strategy to increase global sales by 30 per centby 2030, which was unveiled on Wednesday, Hyundai will also introduce hybrid vehicles in India. This move aligns with the company's plan to sell higher-priced vehicles in the country to boost profit margins.

The company's focus on premium vehicles is evident in its recent sales figures. The proportion of Hyundai cars priced at 1.5 million rupees (approximately USD 18,000) or more - considered upmarket in India - doubled from 7 per centto 15 per centbetween 2021 and 2023, according to draft IPO documents filed in June.

Hyundai, which plans to offer up to 17.5 per centof its shares in the Indian business to the public, has stated its intention to continue this "premiumisation" strategy. This approach has helped the company achieve some of the highest profit margins among its peers in India, albeit at the cost of sales volumes.

Ramakrishnan points out that Hyundai will need to strike a delicate balance between market share and profit margins following its public listing. He warns, "If there is a decline in either aspect, the company may face scrutiny from shareholders."

It's worth noting that despite reaching its highest-ever sales figures in India during the last fiscal year, Hyundai's market share has continued to shrink.

Hyundai's journey in India began in 1996, and its initial success in the country - which has proven challenging for other automakers like Ford and General Motors - was largely due to affordable hatchbacks such as the Santro, which has since been discontinued.

As consumer preferences evolved, Hyundai launched its first locally-manufactured SUV in 2015. The mid-sized Creta, priced between 1.1 million and 2 million rupees (USD 13,000 to USD 24,000), was an immediate success and remains Hyundai's most profitable model.

Currently, Hyundai offers eight SUVs in its portfolio of 13 vehicles. However, its share of India's total SUV sales, which reached 2.5 million units in the last fiscal year, has declined to 19 per cent from 24 per centthree years ago, according to the IPO documents.

Looking ahead, Hyundai is planning to introduce two new gasoline-powered SUVs in India. The first will be based on its Bayon crossover, currently sold in global markets, and is expected to compete with Maruti's Fronx crossover and Tata's Nexon SUV. The second will be larger than the Creta SUV and is anticipated to rival Mahindra's XUV700.

These two new SUVs are projected to add approximately 120,000 units annually to Hyundai's sales volumes, according to one of the sources. In the last fiscal year, Hyundai sold 615,000 cars in India, with 63 per centbeing SUVs and the remainder split between hatchbacks and sedans. The company also exported 163,000 vehicles during this period, as per industry data.

However, Hyundai's competitors are not standing still. Tata Motors, which currently dominates India's EV market with a share exceeding 75 per cent, has announced plans to launch five new electric vehicles over the next three to four years, bringing its total EV lineup to 10 models.

Mahindra has revealed its intention to introduce seven electric SUVs and six new gasoline-powered SUVs by the end of the decade. Market leader Maruti Suzuki is also intensifying its focus on SUVs and hybrids, with plans to launch six EVs by 2031.

An Indian supplier to Hyundai summarises the situation,"The strategies that have brought Hyundai success thus far may not necessarily guarantee its future prosperity. The competitive landscape has become significantly more intense."