Two subsidiaries of South Korea’s HD Hyundai Group have reported a substantial boost in their corporate performance after a strategic scale-down of operations in China. This trend echoes the success of several South Korean entities that have flourished after reducing their reliance on the Chinese market, a trajectory originally spearheaded by the Hyundai Motor Group.
The two flourishing subsidiaries belong to the HD Hyundai Group (formerly known as Hyundai Heavy Industries Group), one of the largest South Korean conglomerates engaged in shipbuilding, heavy equipment, machinery, and petroleum.
HD Hyundai Infracore and HD Hyundai Construction Equipment Co., both manufacturers of construction machinery such as excavators and wheel loaders, have witnessed a remarkable rise in operating profits for this year’s second quarter.
Meanwhile, HD Hyundai Construction Equipment shattered its own records during the same period, with sales amounting to 1.321 trillion won (approximately $800 million) and operating profits reaching 96.6 billion won (about $75.8 million). These figures depict an impressive year-over-year increase of 17.9 percent and 163.2 percent, respectively.
This remarkable growth in performance can largely be attributed to the subsidiaries’ successful business endeavors in North America, Europe, and emerging markets.
HD Hyundai Construction Equipment also broke new ground, registering a record sales volume of 265.6 billion won (approximately $200 million) solely in the North American region, marking a new high in quarterly sales.
Moreover, it achieved an operating profit rate exceeding 9 percent for the first time. Expanded infrastructure investments in key European countries such as Germany, Italy, and France fueled its sales to reach 139.3 billion won (about $100 million).
The heightened demand in the North American market has significantly benefited HD Hyundai Infracore, resulting in larger profit margins. Although its sales growth rate for this year’s second quarter was a modest 6.8 percent, its operating profit ballooned by 126.6 percent.
Furthermore, for the first time since HD Hyundai Construction Equipment established its status as an independent legal entity in 2017, its operating profit rate has crossed the 9 percent threshold.
Subsequently, the percentage of Chinese market sales for HD Hyundai Infracore dwindled year-over-year, from 46 percent in 2020 to 8 percent for the first half of this year. Similarly, HD Hyundai Construction Equipment’s Chinese market share also diminished from 29 percent in 2020 to a mere 5 percent in the first half of this year.
Success Story
Hyundai Motor Group is another typical case of a company that downsized its exposure to the Chinese market but experienced stellar performance growth.
Hyundai was compelled to downsize its dependence on the Chinese market following the THAAD controversy in 2016. Nonetheless, it managed to navigate the tumultuous period and emerged as a success story.
THAAD (Terminal High Altitude Area Defense) is a U.S.-designed and manufactured anti-missile system that was installed in South Korea between 2016 and 2017 as a bulwark against a potential North Korean missile attack. However, Beijing insisted that the deployment of THAAD impacts China’s security and adopted a series of countermeasures and boycotts against South Korea.
As a result, Hyundai’s sales in the Chinese market took a massive hit, declining for six successive years. By last year, the South Korean company’s market share had dwindled to around 1 percent.
This put Hyundai behind only Toyota and Volkswagen in sales, putting it in the top three in global sales for the first time. This was primarily due to the group’s stellar performance in overseas markets such as the United States and Europe.
