If a business school is looking for a case study to use for showcasing a successful market-entry program by a large company, look no further than the South Korean firms that are Kia and Hyundai, sister brands that started on the ground floor — the lowest rung — and have since steadily worked their way up to the point that now, they’re gunning for some of the biggest luxury brands around.
Such a transition has required a tremendous amount of growth over the years, but from the outlook recently issued by Hyundai and Kia executives, that growth won’t be continuing into 2014, as the companies have issued their weakest annual guidance in about eight years, Bloomberg reports.
Combined deliveries will increase by roughly 4.1 percent to 7.86 million vehicles for this year, according to Chung Mong Koo, the chairman of both Kia and Hyundai. Analyst expectations pegged deliveries to fall at 8 million units; it’s also the slowest rate of growth since 2006.
At the heart of the lower-than-anticipated projections was, perhaps not surprisingly, currency issues — a strong Korean won is competing with an increasingly weakening Japanese yen. In international markets, this gives Japanese manufacturers a price advantage when their vehicles are cross-shopped with Kia and Hyundai units.
“The strong won against the yen that intensifies the competition with Japanese automakers remains a concern for Hyundai and Kia,” Shin Chung Kwan, an analyst at KB Investment & Securities, told Bloomberg. “Still, we expect Hyundai and Kia to exceed their sales targets this year and sell about 8 million vehicles combined.”
Chung told Kia and Hyundai employees that the companies will be investing in bettering vehicle safety and technology while the global competition becomes increasingly fierce and the global economy reaches a “low growth era.”
China is currently Hyundai’s largest market, while demand in the U.S. has slowed and pushed the company to initiate a leadership change. Additionally, Hyundai and Kia have agreed to part with as much as $395 million to settle lawsuits in the United States related to claims that they overshot their estimates for the fuel consumption ratings of their vehicles.