For carmakers, it is no longer only about the production and sales of internal-combustion engined, human-driven, road vehicles.
Amid seismic changes in the auto ecosystem in areas as diverse as sustainable energy, autonomous driving systems and ride-sharing, carmakers are being forced to focus on the new norm in the sector – to be “mobility solution” providers, a phrase that encompasses the spectrum of vehicle-linked business.
South Korea’s auto giant Hyundai Motor Group plans related investments of 41 trillion won (US$35.8 billion) through 2025, and can also count on the support of a national government that is throwing its support behind the industry.
Autos face a new future
As environmental regulations are strengthened globally to reduce air pollution, the production of electric and hybrid cars is increasing to replace traditional internal combustion engine vehicles. Hydrogen fuel cell vehicles are one alternative on which Hyundai is placing big bets.
Another trend in this industry is developing self-driving vehicles enabled by ICT technologies and 5G wireless networks. The car-sharing sector is also accelerating. Some experts predict humans will not buy personal cars in the near future.
And the sky is the limit. With the flying car now moving out of the realm of science fiction and into the realm of scientifically feasible – rumors abound that a Japanese-made aerial car will be featured in the opening ceremony of the Tokyo 2020 Olympics – carmakers are being forced to investigate aeronautical and drone engineering, and cooperate with aerospace firms.
This melange of risks and possibilities has widespread implications for the auto sector. Experts say the industry is entering a new era of competition where prior technological edge counts for little.
Hyundai is gearing up for the new era with a buying spree that is bringing in new talent and new technologies.
Securing tech, scouting talent
“In the near future, customers will experience a variety of transportation means such as Urban Air Mobility (UAM), last-mile mobility and robots,” Hyundai Motor Group Senior Vice-Chairman Chung Eui-sun said at a ceremony on October 15 marking the South Korean government’s vision for future vehicles.
“Last mile” mobility refers to short-distance transport solutions, such as kickboards, electric scooters and bicycles, all used by commuters when they exit mass transport systems. Robots, in Chung’s context, refers to wearable robots – such as exoskeletons that assist the disabled or are used by workers to move faster or carry heavy loads.
“Hyundai Motor Group will transform itself from an auto manufacturer into a ‘service company’ that provides new experiences to customers, and we will call it a ‘Smart Mobility Solution Provider,’” aded Chung.
In mobility production, Hyundai Motor is working on developing multiple means of transportation, from traditional engine vehicles to eco-friendly cars and UAM vehicles.
Hyundai plans to reduce the portion of automobile production to 50% in its overall production, while production of UAM vehicles and robots will account for 30%, and 20%, respectively.
Hyundai recently hired former NASA engineer Shin Jae-won to head its new UAM division. Still, pulling in talent from outside the company – or from outside the country – once a no-no in Korean conglomerates, is nothing new to Hyundai.
For more than a decade, the motor group has been recruiting overseas talent. Car designers lured to the group include Peter Schreyer, Luc Donckerwolke and Lee Sang-yup, who previously designed cars at Audi and Bentley. Hyundai also hired German engineer Albert Biermann, formerly in charge of BMW’s high-performance M division.
To improve the performance of electric vehicles, in May this year, the company invested 80 million euros in Rimac, a high-performance electric vehicle company in Croatia.
In September, Hyundai established a joint venture with US self-driving solutions company Aptive, to develop self-driving technologies.
Hyundai Motor Group plans to release 23 electric vehicle models by 2025 – which would amount to about half its new cars. It is also working on a platform exclusively for electric vehicles.
Starting from next year, the company plans to export 1,600 hydrogen-electric trucks to Switzerland and expand its hydrogen fuel cell system beyond autos to function as a source of power in various fields, including ships, trains and power generation.
It plans to release “level 3” self-driving vehicles that will be able to drive autonomously on expressways starting from 2021, and develop “level 4” self-driving cars that can operate on urban streets by 2024.
In an attempt to lower the price of hydrogen fuel cell cars and related running costs, Hyundai announced it would cooperate with Impact Coatings AB of Sweden, H2 Pro of Israel and GRZ Technologies of Switzerland.
Hyundai has also stepped into car-sharing services. While investing in car-sharing companies in Southeast Asia and India, the company has also launched a service in the local market. Customers pay a certain amount every month and borrow two to three models they want to drive during that month.
Support from Seoul
With auto manufacturing being a key national sector, the South Korean government is strongly supporting the development of future cars.
In its “Future Car Development Strategy,” announced on July 15, Seoul said it would increase the sales of electric and hydrogen vehicles to 33% of cars sold in Korea – now such cars account for only 2% of total sales nationwide.
By 2030, the government plans to increase sales of hydrogen cars to 160,000 units – 27 times the current level. The government also plans to help raise the global market share of Korean electric and hydrogen vehicles to 10% from the current 4%.
The government will invest 390 billion won in developing core technologies and continue to provide subsidies to electric car buyers for the time being. Through R&D support, the government plans to help expand the mileage of electric cars to 600 kilometers and triple the charging speed.
The government also plans to expand the durability of hydrogen cars to 500,000km and lower vehicle prices to about 40 million won, while the price of hydrogen will be lowered to 4,000 won per kg by 2030. Hydrogen charging stations will reach 660 by 2030, meaning all consumers in cities should be able to reach a station within 20 minutes.
Empowered by its world-first entry into nationwide G5, the government has set a goal to commercialize the world’s first fully autonomous driving system on major roads by 2027. It plans to complete the necessary system and infrastructure for “level 4” self-driving by 2024. It also plans to introduce collective self-driving for trucks in 2021 and for self-driving buses in 2023.
In a recent report, Lee Jae-il, an analyst at Eugene Investment & Securities Co, said the government had reaffirmed its commitment to support the future car industry.
“It is not going to end with a single vision declaration, but we expect specific policies and achievements to emerge in the future,” he said. “Hyundai Motor Group is currently carrying out innovations to become a mobility solution supplier from a car manufacturer. The government’s policy is in line with this, so Hyundai’s plan for change is expected to gain further momentum.”
The problem of parts
Analysts said the government’s plans should convince Korean parts makers of the industry’s future direction. However, a chaotic situation could arise as Korean parts makers have been slow to respond to changes in the industrial environment, making restructuring look inevitable.
“Korean parts makers were confused with the direction of the auto industry, but this time, I think they see the clear picture of the future of the industry as the government has shown its commitment to developing future cars, “said Lee Hang-koo, a researcher at the Korea Institute for Industrial Economics and Trade.
“However, parts makers are late to respond to the change,” Lee added. “Hyundai Motor said that it would open-source parts, so it could purchase necessary components from overseas part suppliers. This could put local suppliers in trouble.”
Industry experts said that Hyundai did not lag behind its competitors, but some point out that challenges are ahead of Hyundai in its move to be a mobility service provider.
Lee of KIET singled out lack of staff and the insufficient global network for technological cooperation as odds Hyundai has to overcome, and also raised questions over whether it has the funding available to make the huge investments the industry now demands of its future players.
“Establishing joint venture companies with overseas tech firms is a positive, but compared to US or German rivals, its network for technological cooperation is not enough,” he warned. He also pointed out that Hyundai – a manufacturing powerhouse, but not a sectoral innovator – lags in human resources to develop future cars.
“As of 2017, 114,000 engineers were working in Germany’s auto industry, with only 30,000 in South Korea, and the US is estimated to have more engineers than Germany,” he said. “Hyundai is recruiting talented people, including a former NASA engineer, to develop a flying car, but it’s not something we can do with a few people’s abilities.”
Then there is funding capability. “I don’t know if Hyundai Motor will be able to tolerate large-scale investments in such a wide range of fields on its own,” Lee said. “Hyundai Motor’s affiliates can support the investment plan because it is a big business group. The key is how much the affiliate can support.”
Korea’s insufficient original technologies and weaker base in the aeronautics industry are also negative factors in the development of future cars and UAMs, Lee noted.
Reasons for optimism
On the plus side, Korea’s strong ICT industry and automotive batteries companies could be decisive positive factors for Hyundai, he added.
And one analyst suggested that Hyundai should not be considered a latecomer because all carmakers are now facing up to the same situation.
“All carmakers have declared that they will switch to mobility solutions companies, and they are in the process of creating details such as investment and technology development,” said Cho Soo-hong, an auto analyst at NH Investment & Securities Co.
“GM, which first created such a road map, made the declaration in November 2017. Looking at that start line, Hyundai is not in a bad situation.”