Study Guide

Hyundai: Leading the Way in the Global Auto Industry The global automotive industry is one of the largest and most internationalized business sectors. There are seventeen major global automotive companies producing more than one million cars a year. Hyundai Motor Company is South Korea’s number one carmaker and the tenth largest in the world. It sells vehicles in over 190 countries, producing about a dozen car and minivan models, plus trucks, buses, and other commercial vehicles. Popular models in the United States are the Accent and Sonata, while exports to Europe and Asia include the GRD and Equus. In 2008, during the global financial crisis, Hyundai earned a profit of $1.3 billion—among the best in the global auto industry. The Industry During the recent global financial crisis, global automotive sales declined to near-record lows. Automotive industry profits suffered due to significant excess production capacity. Although there is capacity to produce 80 million cars worldwide, total global demand fell to only about 60 million a year. This led to consolidations and divestitures, including those between Ford and Land Rover; Jaguar and Volvo; Fiat and Chrysler; and General Motors and Opel, among others. Consistent with new trade theory, the requisite scale compels automakers to target world markets, where they can achieve economies of scale and maximize sales. The Industry in South Korea Despite its large size, the car market in South Korea (Korea) is insufficient to sustain indigenous automakers like Hyundai and Kia. Korea holds numerous competitive advantages in the car industry. The country is a world center of new technology development. Korea has abundant, cost-effective knowledge workers who drive innovations in design, features, production, and product quality. The country also has a high savings rate, with massive inward FDI, which ensures a ready supply of capital for carmakers to fund R&D and other ventures. Collectively, Korea’s abundance of production