To respond to the rapidly changing paradigm of the future automotive industry, Hyundai Mobis, currently performing restructuring including spinning off some of its divisions and merging them with Hyundai Glovis, has announced its long-term blueprint for future growth.
After the spinoff, Mobis is expected to post 8% growth every year.…25 Trillion Won (2018) --> 36 Trillion Won (2022) --> 44 Trillion Won (2025)
Hyundai Mobis announced on 26th that after a spin-off and merger with Hyundai Glovis, it will grow its sales by 8% every year, from this year's projected 25 trillion won to 36 trillion won by 2022 and to 44 trillion won by 2025.
Of the target sales of 44 trillion won for 2025, the company plans to attain 11 trillion won (25%) from future car business, such as autonomous driving and connectivity car and 7 trillion won (16%) from next generation core parts business, including braking, steering and electronics parts. It plans to attain the remaining 26 trillion won from investment projects, such as overseas branches. Sales targets for future business, core parts and investment projects for 2025 are up 2.2, 1.7 and 1.6 times respectively from this year's. This shows the company's determination to double its future business sales by intensively investing in future ICT parts business.
Hyundai Mobis has continuously explained the meaning of the spin-off and the suitability of the merger through presentations and domestic and overseas roadshows. However, it is the first time that it has officially announced the long-term growth plan, including sales targets.
The company's long-term vision is to become a future new technology company based on its capabilities for core parts and system integration through 'selection and concentration'. Through this, the company aims to transform itself from a traditional automotive supplier to an innovation company that provides innovative services and infrastructure solutions in the automotive sector, taking the advantageous position in the global automotive parts business.
Sources of investment to become a future technology leader by securing future business competitiveness will be backed by Mobis' cashable assets of 6.5 trillion won and its core parts and investment project divisions having stable foundations for profitable business.
In particular, the investment project division responsible for overseas module and after-sale parts business is expected to grow steadily at about 8% every year from 2018 to 2022 with the expansion of overseas plants and the growing overseas demand.
The future car business sales expected to double by 2025, with increased power of negotiation thanks to ADAS and connectivity capabilities
Related industries are paying attention to the future car business of Hyundai Mobis aiming at more than doubled growth by 2025. With expected rapid growth of related markets worldwide, they expect that Hyundai Mobis could expand its global market share dramatically if it builds up its future technology capabilities fast through 'selection and concentration' strategy.
The company's future car business consists of autonomous driving sensors, control/decision logic, ECU controller and next generation display and elementary technologies of connectivity. It plans to complete autonomous driving platforms and connectivity systems through the convergence of such core technologies.
In line with this, Hyundai Mobis decided to gradually secure and mass-produce all sensor-related technologies for autonomous cars, including radar, camera and lidar, by 2022. It will also continue to upgrade various ADAS technologies such as Remote Smart Parking Assist (RSPA), auto braking, and increase their supply. The automotive industry thinks that Level 4 or higher autonomous driving requires convergence of at least 8 cameras, 10 radars and 1 lidar.
The company will also spur the development of future display such as next generation HUD using augmented reality. It plans to concentrate its strengths on developing high value connectivity solutions based on the convergence of multimedia and display technologies with communication/data/convenience/security technologies.
The key to the company's future car business is to secure software and elementary technologies through collaboration and joint development with vendors. Through this, it will combine its competitive hardware system engineering technology for braking, steering, safety and control with sensing and decision control logic technology and suggest an autonomous driving platform to domestic and global automakers, boosting sales.
The growing related global markets are also a positive factor for sales growth. According to the global research firm, IHS, the global autonomous car sales volume is expected to grow to 0.23 million by 2025 and 1.18 million by 2035. These numbers are based on only the sales of fully automated cars excluding limited autonomous cars currently on the market.
During the transitional period before the completion of autonomous car, which is estimated to be at least 10 years from now, the ADAS market corresponding to Level 1 and 2 autonomous driving is also expected to grow fast. The global research firm, Strategy Analytics, predicted that the global ADAS market would grow fast at CAGR of 18% to 16 billion dollars by 2016 and 37 billion dollars by 2021. In particular, the automotive sensor market is anticipated to grow at 23% every year by 2021 with the tightening safety regulations in developed countries and the harsh competition among automakers.
According to the global consulting company PWC, the market for autonomous driving and connected car is anticipated to expand dramatically from 92 million units (cumulative) for last year to 540 million (autonomous driving: 73 million, connected car: 470 million).
With the growing emphasis on autonomous driving software and the fast growing share of core system control business, Hyundai Mobis who has secured competitive edge in such future technologies is expected to have significantly increased power of negotiation.
Hyundai Mobis' global order volume rose from 0.5 billion dollars in 2015 to 6 billion dollars in 2017, and is expected to record 10 billion dollars by 2022.
Based on its independent business competitiveness, Hyundai Mobis will strive to expand sales for global automakers and new sources of profits. What the company targets is reducing its business dependency on Hyundai and Kia Motors, thereby securing the potential for an independent future based on sustainable growth.
Hyundai Mobis who had recorded the order volume of 0.5 billion dollars from global automakers in 2015 recorded 6 billion dollars last year, raising the volume by 12 times in just 2 years. Continuing this momentum, the company aims to grow it by 1.7 times by 2022 to reach the overseas order volume of 10 billion dollars earlier than it planned. It also plans to increase the global order share to more than 40% of the total parts sales.
The overseas order volume of Hyundai Mobis is expected to continue to grow significantly; the company won additional contracts with its existing customers, including GM/FCA (USA), PSA (Europe), MMC/MAZDA/SUBARU (Japan), Dongfeng PSA/FAW (China) for supplying upgraded products, while winning new contracts with other automakers such as Changan Mazda and Geely Volvo (China).
With its efforts to diversify its customers covering both global developed and emerging markets and the expected growth of demand for cutting-edge ADAS products driven by the tightening of safety regulations worldwide, the overseas order volume of Hyundai Mobis is expected to continue to grow.
To this end, the company plans to promote both product diversification and global market expansion at the same time by utilizing its global production bases based on its independent competitiveness for future core technologies. It will also actively promote its future car technologies related to cutting-edge ADAS and autonomous car, spurring its move to strengthen its brand power as a company with future technology power.
Actively promoting M&A to expand future new business ... Assembling a dedicated open innovation team
In addition to its strategy for internalizing independent technologies, Hyundai Mobis will actively promote strategic M&A to rapidly secure business competitiveness. This is part of the company's role of leading the group's future strategy as the top controlling company through intelligent investment decisions to boost the expansion of future new technologies and new businesses. Accordingly, Hyundai Mobis expects to concentrate its capabilities on discovering global startups with novel ideas, making strategic partnership with global firms and pursuing large-scale M&A.
In line with this, last year Hyundai Mobis assembled overseas offices and a dedicated open innovation team aimed to discover and verify competitive vendors, including startups, global technical firms and parts suppliers. With this team, Hyundai Mobis is currently considering M&A and investment projects with vendors having technical capabilities in key areas for autonomous driving and connectivity, including sensors, software algorithm, HMI and platform, regardless of the size and type of vendors. The company aims to lead the convergence in different industries while IT technologies are actively being applied to future car areas such as autonomous driving and connected car.
Hyundai Mobis' mid to long term M&A strategy is to pursue M&A with competitive automotive suppliers to not only secure technologies but also diversify customers and enter new markets, while promoting strategic partnership with local customers in emerging markets.
"Strategic M&A will bring another opportunity to accelerate the attainment of our long-term business goals," said a source from Hyundai Mobis. "We will carry forward M&A primarily targeting various global companies, ranging from ICT elementary technology firms to system- and platform-based companies, and to future core parts suppliers."
With this spin-off and merger, Hyundai Mobis has assembled a new division for investment projects, reinforcing its role and responsibilities as the group's controlling company. By doing so, it is determined to take the initiative in strategic investment and M&A to lead the technical competitiveness for the future automotive industry and create profits.
It is said that one of the reasons that Hyundai Motor Group chose the controlling company system with Hyundai Mobis placed at its peak rather than the holding company system is to avoid limitations in large-scale M&A. It is expected that with the growing needs of Hyundai Motor Group for large-scale M&A to respond to the changing paradigm of the automotive industry, this move will gain momentum across the group.
Accordingly, it is expected that Hyundai Mobis will strengthen cooperation with Global Open Innovation Center Hyundai Motor Group will establish in Israel, China and Germany this year, following US and Korea. It is also expected that in order to lead the 4th Industrial Revolution and respond to future mobility, the automotive supplier will discover promising startups in collaboration with Open Innovation Center when large-scale M&A projects are needed.
Promoting three main strategies: 'Internalize future core technologies', 'Expand global market' and 'Play a leading role in implementing the group's future strategies'
To achieve such business goals and vision, Hyundai Mobis has established three main strategies: (1) Internalize future core technologies, (2) Expand global market and (3) Play a leading role in implementing the group's future strategies.
"We will lead the future automotive industry by establishing platforms and systems that combine hardware and software, thereby expanding our global sales primarily with our core parts business," Hyundai Mobis said. "We will strive to fulfill our role as the group's controlling company by expanding our investment in advanced technology and continuously discovering new growth drivers."
Hyundai Mobis plans to expand sales of future business and core parts business to 40% of its total sales, and also gradually increase its investment in R&D for future technology to 10% of the total parts business sales (1.8 trillion won in 2025) to take the lead in the future ICT-based automotive industry.
Concentrating group-wide capabilities on future technology ... Positive expectations on future growth
Hyundai Motor Group's announcement on 28th last month that it would change its governance to a simpler structure where Hyundai Mobis as the top controlling company placed on top of Hyundai Motors and Kia Motors led to many positive expectations from domestic and overseas related industries and investors.
They think that the group would be able to concentrate its group-wide capabilities on strengthening its future technology competitiveness by intensively investing in future technology R&D and promoting M&A. Hyundai Mobis is expected to strengthen capabilities in electronic parts and software technology and secure newly emerging core technologies such as autonomous driving and connectivity.
To strengthen their competitiveness through selection and concentration, many global competitors are currently changing their business structure to focus on key business areas related to future technologies. This is the reason that Bosch (Germany) and Magna (Canada) recently sold their internal combustion engine parts business and outfit business respectively. Delphi (USA) and Autoliv (Sweden) also spun off their active safety system business including autonomous driving and ADAS-centered electronics business respectively, in this context.