Hyundai’s Biggest IPO Gamble: Can It Thrive in a Slowing Auto Market Ahead of Festive Boost?

Hyundai Motor India (HMI) is getting ready for its Initial Public Offering (IPO), but is this a smart move in a slowing auto market? The company is betting on the timing, with the festive season approaching, which could boost consumer interest and help the market recover. Here’s a look at Hyundai’s current performance and the challenges it faces.

Strong Financial Performance

Over the past few years, Hyundai has shown solid financial growth. Its revenue has grown at a rate of almost 20% per year, while its profits have increased by an impressive 48% in the same period. This has been supported by efficient operations, with return on capital employed at 29% and operating margins around 13%.

At a recent press conference, Tarun Garg, Hyundai’s Chief Operating Officer, said, “We have kept our position as the second-largest car maker in India, both in terms of volume and market share.” Hyundai also has plans to increase its production capacity with a new plant in Pune, which will help meet growing demand and solidify its leadership in the Indian market.

Success in the SUV Market

Hyundai has capitalized on the growing popularity of SUVs in India. The company’s SUV sales have increased significantly, rising from 52% to over 63% of its total domestic sales between 2022 and 2024. Hyundai’s strategy of frequently launching new versions of its models, like the Creta and Venue, has helped keep it ahead of competitors.

Challenges Ahead

Despite its success, Hyundai faces challenges. About 22% of its manufacturing costs come from imported parts, up from 18% in 2022. The company is working to shift production locally to reduce costs. Hyundai is also dealing with rising royalty payments to its parent company, which have increased by over 41% in the last two years.

Additionally, Hyundai’s focus on traditional cars could become a problem as the electric vehicle (EV) market grows. Although Hyundai has started entering the EV space with the IONIQ 5, its EV presence in India is still limited. However, experts believe that Hyundai’s slow entry into the EV market is not an immediate concern, as the company is observing trends and plans to expand its EV portfolio over time.

Competing in a Crowded Market

Hyundai is also facing stiff competition from other automakers, including its own sister company, Kia. Kia has been growing quickly in India and gaining market share, making the market more competitive for Hyundai. Despite this, Hyundai and Kia operate independently and cater to different segments, so Hyundai is not overly concerned about Kia’s growth.

Looking Ahead

While Hyundai has maintained its leadership in the SUV market and launched new vehicles to stay competitive, the overall auto market is slowing down. Passenger vehicle sales have been flat or falling over the past few months, but the festive season could provide a much-needed boost.

Hyundai’s strategic approach to launching new models, expanding production capacity, and gradually entering the EV space shows it is preparing for future growth. Whether its IPO will succeed in a tough market remains to be seen, but Hyundai’s strong brand and track record suggest it is well-positioned for the long term.