PESTEL Analysis of Hyundai

Hyundai is a prominent automobile manufacturer based in South Korea and having a strong global presence. The company has a global sales and distribution network and it sells its products across 200 countries. It offers a diverse lineup of vehicles including cars, SUVs and electric vehicles that cater to the different needs and preferences of various customer segments.

Hyundai also has a significant stake in Kia Motors, another well known South Korean automobile manufacturer. Apart from that, Hyundai has released Genesis, a brand that serves the needs of the higher end consumers. The company sold 4.22 million vehicle units in 2023, which was 6.9% higher compared to the prior year. The company is known for its focus on innovation, efficiency, quality and passenger safety. As a result it enjoys strong popularity and demand in various corners of the globe.

As a leading international brand of automobiles selling its products across around 200 countries, Hyundai also faces various types of challenges in the international market. In this PESTEL analysis of Hyundai, we will analyze how these macroeconomic forces affect Hyundai’s position and competitiveness and what challenges and opportunities they present.

POLITICAL

Political factors play a crucial role in terms of international business. The state of government affairs in various markets can have a significant impact on the performance of businesses operating there. Political stability often has a positive impact on international business operating in a particular market. There are several geopolitical factors that can affect businesses and their supply chains significantly. Since the war between Russia and Ukraine began, several leading international brands have exited the Russian market. Hyundai has also announced its final exit from Russia following the war and will sell off its plants there.

Several more political factors including relationships between two nations as well as tax structure trade policies, trade agreements and level of infrastructure development affect the performance of automobile businesses. While political stability is crucial for good business performance, companies like Hyundai also have to consider other factors including infrastructure, tax and labor laws. Overall, the role of political factors in terms of international business is critical. Hyundai is operating in a large number of leading markets internationally. However, its performance has been excellent owing to relative political stability in most areas and South Korea’s good relationships with other nations.

ECONOMIC

Economic factors also play an integral role in terms of business performance and growth. They can have a very significant impact on automobile businesses especially as was evident during the recession when some leading automobile companies required government support or bailout to continue their operations. As a leading automobile brand, Hyundai is also subject to economic pressures and fluctuations in the global market.

Economic factors like economic growth, GDP and employment affect automobile businesses and their sales. When economies are performing well and growing at a significant rate, the demand for automobiles including higher end vehicles remains higher. When the level of unemployment in a particular market is lower, the demand for vehicles can grow but falls when unemployment rises. In this way, economic factors are crucial in terms of operations and strategy for automobile businesses such as Hyundai. Over the past few years, the global economy and the economies of leading automobile markets such as the US, China and India have been performing well leading to better sales for Hyundai.

SOCIAL

Social factors have also gained a critical importance in terms of business. Social changes now affect businesses like never before. The social image of businesses has also become important for business growth and profitability. It is why automobile businesses like Hyuundai strive to manage a strong social image.

Demographic changes around the world have also affected international businesses. The demographic changes in the global population necessitate businesses to focus upon the changing preferences of their consumer segments worldwide. Automobile businesses such as Hyundai are now focusing on the needs and preferences of the millennial generation which is now their main consumer segment. Hyundai also invests in CSR to maintain a good social image. It has started several such initiatives to improve driving awareness among public transport drivers in key markets including India.

Hyundai’s CSR initiatives also extend to its supply chain network. The company has increased its focus on human rights protection in its supply chain.

ENVIRONMENTAL

Environmental factors have also become a critical focus area for automobile businesses. Apart from the increased focus on environmental legislation, increased environmental awareness globally has also played a key role in driving this change. As a leading automobile manufacturer, Hyundai is committed to environment friendliness and sustainability.

As a part of its sustainability commitment, the company focuses on creating more eco-friendly vehicles, water recycling, increasing renewable energy use, and investing in making products and processes more sustainable in its own operations as well as its supply chain.

In 2023, the company sold 268,785 units of electric vehicles which was 28% higher than 2022. Moreover, the company increased its water reuse by 15.2% in 2023 compared to 2022. It is also investing heavily in making its factories carbon neutral and has achieved significant milestones in this direction according to its sustainability report 2023.

For leading automobile companies like Hyundai, it is important to stay committed to environmental protection. Apart from having a positive impact on the environment, it also has a significant positive impact on the company’s image.

TECHNOLOGICAL

Technology is a leading factor affecting sales growth and market share in the automobile sector. Companies that are focused more on innovation are finding higher sales growth and are able to expand their market share as well as reduce the competitive pressure. Hyundai is known for its strong focus on innovation. Apart from electrification of its product line and future mobility, the company is also investing in innovation in other areas including robotics and hydrogen utilization.

The company has established several research and development centers worldwide. It invests a large sum each year in research and development to continuously improve its business and product lineup. In fiscal 2023, Hyundai spent a total of 3,968,864 million Koran won on research and development. Another critical area where the company is focusing heavily is autonomous driving. Hyundai is introducing advanced safety technologies that prevent accidents in direct driving scenarios, such as through airbags, seat belts, and ADAS (Advanced Driver-Assistance Systems), and proactively protect both passengers and pedestrians from potential risks.

LEGAL

Legal and regulatory factors are also of critical significance for players in the automobile industry. There are several areas including labor, product quality, passenger safety and so on that require compliance. Laws and regulations also differ from market to market and compliance to the local laws in all the markets is essential for Hyundai.

If the company is found noncompliant in any area, it might incur heavy fines imposed by government agencies. In case of a product defect, the company is forced to make recalls. Recently, Hyundai and Kia jointly recalled a total of 147,110 vehicles in the US including the electric vehicles Ioniq and the EV6. The reason behind the recall was that a part inside the cars may stop charging their batteries. Such product recalls or legal noncompliance can hurt the company’s image. Therefore, to avoid such situations where noncompliance may prove costly for the company, Hyundai has established a compliance management system. The system ensures that the company operates in accordance with laws and ethics.

Conclusion

International business is full of both opportunities and challenges. Hyundai is a leading automobile business that sells its products across 200 countries. The company has exited Russia following the conflict between Russia and Ukraine. The company makes political factors an important consideration in its business strategy since these factors have a deep impact on business. Apart from political factors, economic and technological factors also have a critical impact on its business, Hyundai has maintained a heavy focus on innovation and has established a large research and development network. It also invests heavily in research and development. The company is also focused heavily on sustainability and customer experience to maintain a strong brand image in the market.