Hyundai Motor's chief stresses importance of quality, brand power

SEOUL, July 14 (Yonhap) -- The head of Hyundai Motor Group on Monday emphasized the importance of quality competitiveness on par with production growth as a means to overcome tough new challenges from slowing growth in emerging markets and unfavorable exchange rates.

In an address to CEOs of the group's overseas operations, Chung Mong-koo, chairman of the world's fifth-largest carmaking group in terms of volume, said that there is no way to skirt potential hazards facing the carmaking sector and that the only option open is to build up capability and competitiveness.

Competition is heating up to win key markets, with slowdown in growth in emerging economies and rising local currency posing serious complications for Hyundai Motor and Kia Motors, he told some 60 CEOs gathered in Seoul.

"The most important thing is to build up quality competitiveness that is on par with growth in global production and market presence," Chung emphasized.

In the first half of 2014, Hyundai Motor and its affiliate Kia Motors sold a combined 4,043,415 vehicles, up 5.4 percent from 3,836,445 units sold a year earlier.

In foreign markets alone, the two largest South Korean carmakers sold 3,478,217 cars, a 5.9 percent increase from the same six-month period in 2013.

Hyundai officials said that while the global market as a whole has grown this year, output capacity of carmakers may go up by as much as 2 million, which can lead to quality issues and excessive competition. The worldwide automobile market may grow 3.6 percent on-year to around 84 million in 2014, according to Hyundai estimates.

Hyundai and Kia, in the past, had held back capacity buildings to concentrate on quality at the expense of greater market share.

In addition, the weak Japanese yen is allowing carmakers such as Toyota and Honda to offer cars at discounted prices or add more content to individual vehicles, undermining the value proposition of South Korean carmakers on the global stage.

Another area of concern is that while the U.S., European and Chinese markets have all grown, demand for new cars in large emerging markets such as India, Russia and Brazil have all contracted.

In the January-May period, sales in India were down 3 percent on-year, with numbers for Brazil and Russia heading south by 5.1 percent and 5.6 percent, respectively.

Even in the case of China, moves by authorities to control sales of cars in cities may affect demand, while slowdown in growth and worsening job market conditions in Germany and France may hurt carmakers' performance.

It is imperative that quality control become interwoven into all aspects of the production process, starting with design and development, with close checks being conducted throughout the making of vehicles to ensure that only the best products are made, Chung said, calling for more quality control-related training to be carried out across the board.

He also made clear that every aspect of carmaking must be oriented toward the consumer.

"Products that reflect the specific needs of various consumers must be made with related service and marketing strategies to reflect this goal," Chung said. He said by pursuing this path, Hyundai Motor and Kia Motors can win the trust of consumers and enhance its brand power that can allow the carmakers to respond proactively to changes in the global market.

The chairman, moreover, called for close cooperation with parts and components suppliers and to take all necessary steps to ensure stability in the supply chain and sales networks.

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