From just a tiny workshop to overtaking Mercedes, this is Hyundai’s story of grit
Hans · Nov 16, 2020 09:00 AM
According to USA’s J.D Power IQS survey, the highest quality car is not made Mercedes-Benz or Lexus, but Hyundai’s Genesis brand, which has unseated Toyota’s Lexus to claim to the top spot for the last four years. In Europe - the spiritual homeground for good handling cars - the Hyundai i30N is now more popular than the BMW M135i, and it's rated higher by the automotive press there too.
Hyundai cars don’t just match the best of Germany and Japan - they are actually better. It is hard to imagine that as recent as just two generations ago, Korea was poorer than many African countries.
After World War 2, many countries including Malaysia experienced rapid economic growth of various degrees, hence the term baby boomers generation.
The Korean peninsula however, saw none of this. In 1961, the average South Korean earned less (USD 82/year) than half of a Ghanaian citizen (USD 179/year). Never mind Malaysia, South Korea was poorer than even Yemen, Haiti, or Ethiopia!
World renowned economist Chang Ha-Joon, author of "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism,” said just one generation before, his mother’s childhood involved consoling her starving 5-year old brother who yearned to hold a bowl, even if it was empty.
Economists call Korea’s meteoritic rise the ‘Miracle of the Han river,’ named after the river that flows through Seoul.
At the heart of this impossible-made-possible, rags-to-riches story is Hyundai, whose construction division literally rebuilt Korea after the devastating Korean War (1950 – 1953).
Hyundai was founded by Chung Ju Yung, first as a small car repair workshop called A-do Service Garage in 1940, which would later become the Hyundai Motor Service Garage, in 1946.
When Korean President Park Chung Hee pushed to build a Korean car industry, Hyundai Motor Company was founded in 1967.
In between Hyundai Motor Service Garage and Hyundai Motor Company, Chung Ju Yung had already established Hyundai as a big name in constructions and ship building. How and why he managed to do all that requires a separate post.
However, we do have enough space to squeeze in a little anecdote – when President Park was doing a spot check in one of the construction sites that Hyundai was given the contract to build (if only our ministers do that), the President was shocked to learn that Chung Ju Yung sleeps on site with his men, thus gaining the confidence of the President for future nation building civil projects.
But let’s not digress and stick to the motor business.
Unlike the early days of Proton, Hyundai didn’t have it easy, even though imports were banned in Korea. It still had to compete with Shinjin Motors (later became Daewoo, now part of GM), Asia Motors (later absorbed into Kia), and Kia Motors – all were funded by the government, but with strict and nearly impossible targets to export because the country desperately needed foreign currency.
Shinjin partnered with Toyota to assemble Coronas, Asia partnered with Fiat to assemble the Fiat 124, while Kia paired up with Mazda to build the Familia. Meanwhile, Hyundai worked with Ford.
The first car built by Hyundai was actually a Ford Cortina, in 1968. It was a start but Chung Ju-Yung felt that building cars that don’t belong to them doesn’t guarantee long-term profitability.
Ford wanted to make Hyundai part of Ford’s global empire, using Korea to assemble Ford engines, putting them into Australian-made Ford chassis before exporting the finished cars to Japan.
However, Chung felt Ford’s plans was an insult to Hyundai and to Korea. The Koreans were still poor, but they had massive egos. The only consolation was that their pride was matched by their incredibly hardworking attitude.
Chung dissolved the partnership with Ford in 1973, and formed technical alliance with Mitsubishi, which granted Hyundai greater freedom - an arrangement that Chung preferred.
Hyundai’s first self-developed car was the 1975 Hyundai Pony. It was designed by Giorgetto Giugiaro, thus explained why the flat panels and sharp lines were reminiscent of the VW Golf Mk1.
At this point, the running of Hyundai Motor was passed to Chung Ju Yung’s younger brother Chung Se Yung, who speaked much better English and was better suited to take the Hyundai brand to the world.
Of course, like all chaebols, things got really complicated in the following decades, and during the 1997 Asian Financial Crisis, Ju Yung had to force his brother and nephew off Hyundai Motor, and installed his son Chung Mong Koo as Chairman.
But Mong Koo is not your average 2G (Asian description children with inherited wealth) guy, both for better and for worse. Like sons of many chaebols, he has his own controversies and run-ins with the law - all finance related. Life was hard in the Chung family, despite their wealth.
The father didn’t allow any of his children to be chauffeur-driven to school. They had to take the bus, and were given very little allowance money, which their mother had to secretly supplement. Breakfast begins at 6 am and he expects all his children to be up by then. By 7 am, the sons will accompany their father and walk 4 km to the Hyundai headquarters.
Yes, one of the richest man in Korea walked to work. Of course, his sons no longer follow such eccentric work habits, and that’s a good thing.
If Chung Ju Yung started Hyundai Motor, then his son Chung Mong Koo was the one who brought Hyundai’s quality up to Toyota’s standards.
An engineer by training, Mong Koo vastly improved Hyundai’s manufacturing processes to allow the company to offer the famed Hyundai 10-year/100,000 miles (161,000 km) warranty in the US.
For his work in elevating Hyundai's quality, he became the first Korean to be inducted in USA’s Automotive Hall of Fame.
An unexpected nod of approval from Germany – the Winterkorn incident
It was the 2011 Frankfurt Motor Show, four years before Dieselgate blew up, when Volkswagen Group's CEO Prof. Dr. Martin Winterkorn was still emperor of Germany’s powerful car industry empire. But before he was CEO, Winterkorn was an engineer who can’t resist the temptation to examine his competitor’s products at a motor show.
Before Dieselgate, the ‘Winterkorn incident’ was VW’s biggest public relations gaff, one that Hyundai was an unintended beneficiary, bringing it a far higher PR mileage than all of its ad budgets combined.
The Winterkorn incident refers to a viral video of Dr. Winterkorn walking up to Hyundai’s booth at the motor to check out the i30. Winterkorn was seen taking out a paint thickness gauge to inspect the boot lid, before getting into the driver’s seat.
Unknown to him (or maybe he didn’t care), someone was filming him and jumped into the back seat. The video captured him mentioning that even the wipers are hidden from view (like many VW cars). He inspected the steering rack, which he immediately summoned VW’s designer Klaus Bischoff.
In his typically demanding manner, Winterkorn barked “Bischoff!,” who quickly walked over. “This doesn’t rattle,” pointing to the Hyundai steering wheel. “BMW can’t do it, we can’t do it.”
“We had a solution, but it was too expensive,” answered Bischoff. Unhappy with the answer, Winterkorn snapped back “Warum kann’s der?” – How can they do it then?
What many didn’t know was that Hyundai’s then Vice-Chairman Chung Eui Sun was also present at the booth, and the groundwork to challenge the best of Germany was already being laid.
Unlike his father, Eui Sun had a more public-relations-friendly personality, and harbours very different ideas of making the Hyundai brand truly global, something which we are starting to see now. He was recently promoted to Chairman earlier this year.
Unlike his father, Eui Sun is fluent in English, and is comfortable in engaging with foreign media. Being younger, he also has a more cosmopolitan worldview, rather than a very Korea-centric one.
While his engineer-trained father was more into manufacturing, Eui Sun was more right-brained, and worked to grow the Hyundai and Kia brand, as well as its design.
It was during his tenure as President of Kia that he lured Audi’s Peter Schreyer to be Kia’s head of design, and later Chief Design Officer for the wider Hyundai Motor Group.
Up until then, Hyundai was a very inward looking company and appointing a foreigner into a key management position was almost unheard of, but Eui Sun knows that to be a truly international company, it needs to hire the best, regardless of nationality.
Frank Ahrens, author of Seoul Man and former Vice President of global corporate communications of Hyundai Motor – also the first non-Korean to hold such position – wrote in his book that during his tenure in Seoul, Eui Sun would travel in a dark blue limousine, which at that time, was a Hyundai Equus (now succeeded by Genesis G90).
The choice of colour doesn’t mean anything to any casual foreign observer but it was radical in Korea’s stiff corporate culture, where there’s an unspoken rule that only black limousines can be used for businesses.
The younger 3G heir of Hyundai has a streak of rebellion in him, all while complying with Korea’s complex cultural norms.
Under Eui Sun, we now have slick and sophisticated global marketing materials like the one above, highlighting Hyundai's unique heritage.
Hyundai remains the only car maker that makes not just its own engines and transmissions, but also its own steel for the car's body, and thanks to its construction business, it also builds its own factory. Not only that, even the ships and ports where the finished cars are shipped out, are also built by Hyundai.
It was also during Eui Sun’s tenure as Vice Chairman of Hyundai Motor Group that the Genesis brand was created. If Eiji Toyoda initiated the Flagship 1 project to create Lexus, to challenge the best of Mercedes-Benz, then Eui Sun founded Genesis to challenge not just Lexus, but also Mercedes-Benz.
Nearly all major automotive media in the US recognized the G90 as more than a credible alternative to an S-Class. Not bad for a brand that started in 2015 (before that, Genesis was a model name).
Unfortunately, the Genesis brand is not for us (previous model sold here was a Hyundai Genesis, still a Hyundai).
Like the early days of Lexus, the Genesis brand is characterized by large capacity engines and a very US-centric model line-up. This is understandable as the US is still the world’s most important luxury car market, and it’s only logical to establish a firm footing there first before expanding elsewhere.
Next year, Genesis will be launched in China, to be headed by ex-Mercedes-Benz Vice President Markus Henne, adding to yet another foreign hire under Eui Sun’s watch.
The story of Hyundai’s transformation from a mere workshop to a world-class automaker that now challenges the best of Mercedes-Benz, all achieved in less than 50 years, is also a story of Korea’s dramatic transformation.
How Korea lifted itself up from being one of the poorest countries in the world to becoming the world’s most digitally connected country in just three generations, when only 20 percent of country’s mountainous landscape can be used for agriculture and living, is worth a separate story, but we will keep that for another day.