As Hyundai Motor Company (HMC) prepares to sell shares in its Indian subsidiary Hyundai Motor India (HMIL), going forward, it will need to balance the growth prospects of its own brand and that of its affiliate company, Kia.
This is because both the brands tap into a common resource pool, including vehicle model development, engine development and part supplier base, in India. In the draft red herring prospectus (DRHP), HMIL has cautioned that there could be conflict of interest between itself and subsidiaries of its Korean parent, including Kia.
“Hyundai Motor Company may consider the interest of all their subsidiaries and affiliates, which may not align with our interests. This in turn could give rise to various conflicts of interest between us and Hyundai Motor Company and its affiliates, which could impact our operations,” the Indian automaker said.
The Korean company holds a 34.16% stake in Kia Corporation, which operates in India through its subsidiary, Kia India. HMC’s chairman is also the chairman of Kia.
“We also supply engines to Kia for their vehicles. Given the potential product overlaps between our offerings and those of Kia in India, there is no assurance that conflicts of interest will not arise between the two businesses, which could negatively impact our business and prospects,” HMIL added.
Both Hyundai and Kia compete in the sports utility vehicle (SUV) segment. While Hyundai has increased its dependence on the SUV segment to 62% from 45% in just 30 months, Kia does not have a presence outside of the utility vehicle segment, leaving both the companies to pursue a common customer.
Hyundai has seen a decline in its market share since the debut of Kia in FY20. The company closed FY24 at 15% share of the domestic market, down from 17.5% clocked in FY20, as per data from the Society of Indian Automobile Manufacturers (SIAM). Kia’s share at the end of FY24 stood at nearly 6%.
Both companies are planning to launch electric vehicles (EVs) in India by next year. Kia plans to launch two EVs by 2025, including a locally manufactured, India-centric small, mass-market model. It will also launch an RV (recreational vehicle) body-style EV by 2030.
Kia India plans to invest Rs 2,000 crore to drive research and development (R&D), infrastructure development and manufacturing capabilities to locally produce EVs in India.
Within four years of its debut, Kia India clocked a net profit of Rs 2,122 crore in FY23. It took Hyundai 20 years to achieve the same net profit figure.
