South Korea’s largest carmaker Hyundai Motor is hoping to revive its flagging fortunes by building more hydrogen-powered cars, as part of the country’s bid to become a leader in hydrogen technology by 2040. Last October in the United States, the company launched Nexo, an SUV that goes 609km on a single charge, has no battery, and puts out nothing but water vapour from its exhaust. And in December, it announced it would spend US$6.7 billion from now till 2030 on hydrogen technology.
But its commitment to hydrogen fuel cell-powered cars is confounding some experts even though they agree the carmaker, the fifth-largest in the world by sales but struggling in the Chinese and American markets, needs to keep innovating.
Namuh Rhee, former managing director of Merrill Lynch and now a professor at Yonsei University in Seoul, said the focus on hydrogen cars was “questionable” because of the huge costs involved, while “virtually all other global car makers” had made big plans to produce battery-powered electric vehicles (EVs). The country also has a shortage of refilling stations for hydrogen vehicles in comparison to the growing number of charging stations for EVs.
Figures in the car industry, such as Tesla CEO Elon Musk, had previously called hydrogen cars “mind-bogglingly stupid”, pointing out that developers were looking too far ahead at untested technology, even though the battery-powered solution to cleaner vehicles already existed.
Hyundai’s plan, though, is aligned with President Moon Jae-in’s strategy to boost the local hydrogen economy. In a speech on January 17, he noted that a major part of the plan would involve ramping up the production of hydrogen fuel cell electric vehicles, which currently trail battery-powered electric vehicles in popularity.
Moon promised laws would be modified to allow hydrogen production to thrive, while there would be subsidies to encourage demand for hydrogen-powered vehicles.
He said the country had produced 1,824 hydrogen cars as of end-2018, with more than half being exported. This year, the number would rise to 4,000, with a goal of 1.8 million cars by 2030.
The advantages of domestic hydrogen production and distribution, he said, was that it would ease South Korea’s heavy dependence on energy imports – which currently provide 95 per cent of the country’s energy needs.
“If the country is able to be relatively energy self-sufficient through the hydrogen economy, it will be possible to steer our economic growth more [in a more stable way] and safeguard our energy security more steadfastly,” he said.
Hyundai, a pillar of the South Korean economy and partially owned by the family that founded it, still needs to prove that hydrogen is the technology of the future, and that it is capable of reinventing itself.
Last month, the carmaker’s executive vice-chairman Chung Euisun – who is the apparent heir to his father, the company chairman Chung Mong-koo – joined a coalition of CEOs lobbying for hydrogen to be a bigger part of the global energy mix.
Chung Eui-sun, 48, is now a co-chair of the Hydrogen Council, which counts Chinese oil and gas enterprise Sinopec, American multinational 3M and German automotive firm Daimler among its members.
At the same time, Hyundai, which commands only 4 per cent of the Chinese and American car markets – down from almost 10 per cent in both a decade earlier – is also building electric vehicles. The company had previously announced it would release 44 models of electric vehicles (EV) by 2025, and last month, the Indonesian government announced the carmaker would set up its first Southeast Asian factory there to build electric cars for both export and domestic use.
Rhee pointed out Hyundai had been slow to make the transition to EVs and autonomous driving, while other analysts said the company was at least three years behind competitors like Volkswagen, which is set to make electric versions of all its vehicles by 2030, and General Motors, which will have 20 EV models out by 2020.
To show its commitment to innovation though, the company recently got two vice-chairmen in charge of research and development, both aged 64, to step down in December. It then appointed Albert Biermann, who formerly headed BMW’s M division and created several iconic cars, to head R&D efforts. Other engineers from BMW have also crossed over to join Biermann.
Seoul-based capital markets analyst Steve Chung, of investment group CLSA, said Hyundai had undergone “massive management reshuffling” with younger people taking control of major functions in the company.
“Maybe it’s a bit late, but I say better late than never. That’s why the share price has been rebounding,” said Steve Chung, who is not related to the family that founded Hyundai. In 2018, Hyundai Motor’s stock nosedived from its high of over 260,000 Korean won in 2013, to below 95,000 won (US$85) last November. It is now at 129,500 won.
Ghim Hyunjoon, a company representative, said Hyundai was making great strides in its “cooperation with various start-ups, academics [and the like] to lead the future mobility market”. The carmaker also owns a minority stake in the country’s second-largest car company, Kia Motors.
Last month, Hyundai took home two top awards from the Detroit Auto Show for best car and best SUV. It also unveiled in Las Vegas the world’s first holographic navigation system, which projects images on to the windscreen to guide drivers through turns and alert them to dangers. The system was born out of a collaboration with Swiss-headquartered augmented reality company WayRay, suggesting the infamously closed-door carmaker is starting to embrace start-ups as it looks to the future.
Despite its recent wins, the outlook for Hyundai is still challenging, as the younger Chung acknowledged in a New Year’s speech to staff last month. He is expected to soon formally succeed his father, who is 80 years old.
Analysts suggest the global car market is shrinking. Ageing baby boomers in the US are making fewer new vehicle purchases, while ride-hailing is expected to reduce car ownership overall, according to an industry report from consulting firm Bain & Company.