Hyundai and Kia feel the heat from China in South Africa

Major vehicle importer and distributor Motus is feeling the pressure from Chinese brands entering the domestic market.

Motus is the accredited importer and distributor of Hyundai, Kia, Renault, and Mitsubishi vehicles in South Africa, supplying these cars to Motus-owned dealers, independent dealers, government, fleets, and vehicle rental companies.

In its latest earnings statement covering the financial year ending June 2024, Motus reported a year-on-year drop in revenue of 22% to R19.28 billion in its vehicle importing and distribution division. Its operating profits in this division fell by a more noticeable 45%, to R780 million.

Over the same period, the local market share of all Motus brands equated to 17.8%, down from 21.3% the year prior.

Hyundai achieved a 7.8% share (2023: 8.4%), Renault did 5.3% (2023: 6.7%), Kia scored 4.2% (2023: 5.4%), and Mitsubishi scraped together 0.5% (2023: 0.8%) for the 12 months to 30 June 2024.

The car retailer attributed this loss of ground in 2024 to a variety of adverse market conditions, perhaps most notably the strong competition from Asian brands.

“The importer brands [Hyundai, Kia, Renault, and Mitsubishi] continue to face market pressure and are being negatively impacted by the slow-down in consumer demand, strong competition from the Asian brands entering the market, as well as consumers buying down to entry-level vehicles which is negatively impacting the mix of vehicles sold,” said Motus.

“The excess supply of stock by all OEMs [Original Equipment Manufacturers] during the year negatively impacted margins as supply exceeded demand.”

While challenges such as tight consumer purse strings and surplus units have periodically plagued auto retailers over the years, a relatively new headwind is increased competition from China.

South Africa has welcomed numerous manufacturers from the People’s Republic in recent times, many of which cater to the budget-conscious buyer.

GWM was one of the first to lay the groundwork for Chinese nameplates in South Africa, and it was followed in quick succession by badges such as Chery, Foton, Jaecoo, LDV, and Omoda after they saw the success their compatriot enjoyed.

Premium nameplates such as BMW and Mercedes-Benz were among the first to be hit by the Chinese onslaught, with more established wallet-friendly brands such as Hyundai and Kia now also starting to feel the heat.

Today, market intelligence company Lightstone estimates that Chinese brands account for 9% of all light vehicle purchases in South Africa, a more than four-fold increase from the 2% they boasted in 2019.

Motus responds

In response to the advance from Chinese automakers, Motus has taken decisive steps to retain its market share in South Africa.

The company revealed that it covers seven months of forecasted vehicle import orders to avoid disastrous effects brought about by the volatile nature of the South African Rand.

“Hyundai, Renault, and Kia have forward cover for the Euro and US Dollar to March 2025, respectively, at average rates of R20.58 to the Euro and R18.59 to the US Dollar, including forward cover costs. Mitsubishi is covered for all committed orders,” it said.

Furthermore, the retailer recently slashed the prices of three of the most popular vehicles in its stable – the Hyundai Grand i10 and i20 hatchbacks as well as the Venue crossover.

“The strategy behind this move was with the customer in mind, where we provide the customer with quality vehicles at the right price,” a spokesperson for Hyundai told TopAuto when questioned on the motive for the price cuts.

The initiative seems to have already paid dividends.

In June, the Grand i10 moved a total of 948 units positioning it as the 10th best-selling car in South Africa.

Following its price adjustment in July, the city car immediately ascended to the sixth best-selling car in the country with a sales tally of 1,383 units, a rank it retained in August with 1,328 registrations.

Should this strategy prove successful in reversing the downtrend in Hyundai’s market share, we may see it applied to other top performers in the Kia, Renault, and Mitsubishi stables.