Korean technology and manufacturing appear to be on a roll in 2020. Their response to the COVID-19 crisis has been noteworthy for its effectiveness, and their major manufacturing companies, like LG and Samsung, have carved out a major portion of global market share in technologies like electric vehicle batteries. LG, Samsung and other large enterprises in Korea, called chaebol, are typically highly diversified, much more so than large manufacturing firms in the United States or Europe. Hyundai is an example. While best known for automating, Hyundai operates in multiple industries from shipbuilding to finance.
Hyundai has been involved in the robotics industry since 1984, producing their first welding robot in 1987, exceeding an annual production of 50,000 industrial robots the following year. Despite that considerable production, the robotics division of the firm has maintained a low profile as a business unit operating inside the Hyundai Heavy Industries Holdings group.
On May 1 however, the Heavy Industries group officially spun off the automation business into a new company, “Hyundai Robotics”. The key management team carries over and the new business is wholly owned by Heavy Industries. According to Hyundai Robotics, the reason for the spinoff is to facilitate expansion from manufacturing and commercial cleaning robots, to smart factory automation, including IIoT and robotics as service offerings. The company noted that the newly independent business may also seek outside investments in the future.
Hyundai Robotics in turn is launching a subsidiary company, Hyundai L&S, to develop logistics automation for the distribution market. The new entity plans to diversify robotics offerings to include small high-speed part handling robots, cobots and specialized mobile service robots for the electronics industry.
Assembly is still the core of the business however, and the new company will ship their first major order to Hyundai’s new Indonesian assembly plant in the Deltamas Industrial Complex near Jakarta. The turnkey project includes 370 vehicle manufacturing robots, peripherals and smart factory controls for automatic recognition of assembly variants and specs, real-time equipment inspection, and preventive diagnostics. According to Hyundai Robotics, the order was won in competition with robotics firms from Germany, Switzerland and Japan.
ASEAN: A major growth market for auto production
With Asia hosting multiple auto manufacturing plants from all major automakers, why Indonesia? The answer lies in demographics. Hyundai’s plan is to produce for the ASEAN (Association of South East Asian Nations) a 10-member economic block ranging from Thailand to Papua New Guinea. While frequently considered a political organization, ASEAN is an economic trading block of considerable size. The total population of almost 700 million, and a combined GDP of over $4 trillion, the auto market is considerable. According to the ASEAN Automotive Federation, the annual auto demand for the region was a pre-COVID 3 ½ million units per year, a figure that exceeds annual production of motorcycles and scooters, a key indicator of rapidly developing economies. Hyundai estimates that annual production for the region will reach 4 ½ million units by 2026.
Auto sales are an important measure of national wealth, and the region expects considerable growth according to the International Monetary Fund. The IMF predicts a US dollar per capita gross domestic product of just under $19,000 in 2024, considerably higher than India, but still lagging South Korea, China, Japan and the United States. In comparison, US per capita GDP in 2024 is projected to reach $76,000, and Japan and South Korea will both enjoy growth to over $50,000. China is climbing but is considerably behind at $28,000. The ASEAN region offers a combination of a trading block moving toward economic integration, strong population growth and a rising standard of living, making the region a natural place for auto production, and the low base from which GDP is growing favours manufacturers of low-cost vehicles. The ASEAN region appears tailor-made for Hyundai.
The new manufacturing facility is Hyundai’s first in Indonesia and is expected to be completed in 2022, with a nominal output of 250,000 cars per year. It will be located on an 8.35 million-square-foot site in Kota Deltamas, an integrated industrial, commercial and residential district on the outskirts of Jakarta. Hyundai expects to invest $1.5 billion through 2030, including new product development costs. For the Southeast Asian market, Hyundai will design specific compact SUV, MPV and sedan models. First production was predicted (pre-COVID-19) to begin in the second half of 2021 at an annual run rate of 150,000 vehicles. The new Indonesian plant will include stamping, welding, and assembly operations.
Hyundai’s “beachhead”
Hyundai Motors expects the new plant to become a beachhead for its ASEAN business and to create 23,000 jobs in the complex and in support businesses. The company estimates the economic impact over a decade to reach 20 billion dollars.
The company is also currently exploring the production of ASEAN-specific electric vehicles (EV) in Indonesia. Hyundai, together with sister company Kia Motors Corporation, projects that the Hyundai Motor Group will be the world's third-biggest EV manufacturer in the world by 2025.
In the meantime, the new Indonesian operation will assemble vehicles on a build-to-order basis to lower inventory costs. Along with the new manufacturing process, Hyundai is adding a new online/off-line/mobile retail sales system with local e-commerce companies. The e-commerce focus will later add connected services such as voice command and in vehicle shopping. In parallel with the on-line retailing system, the company will still operate a nationwide network of 100 dealers by 2021.
Hyundai Motor Group is currently the fifth largest auto manufacturer in the world, making seven and half million vehicles annually around the world.