Hyundai Motor India’s attention-grabbing IPO

Shifting attention away from US and EU tariffs on Chinese electric vehicles and the exploits of Tesla’s Elon Musk at least for a moment, the Indian subsidiary of Hyundai Motor is preparing for an initial public offering on the stock market in Mumbai.

Hyundai is the second most popular passenger car brand in India after Maruti Suzuki. Together with its affiliate Kia, the South Korean automaker has more than 20% of the market, ahead of third and fourth ranking Tata Motors and Mahindra & Mahindra. It is worth noting that not one of the top auto brands in India is Chinese, although ninth-ranked MG is owned by China’s SAIC.

By the end of this year, if the Securities and Exchange Board of India approves, Hyundai Motor India will be the first auto company in India to go public since Maruti Suzuki in 2003. Hyundai Motor reportedly hopes to sell up to 17.5% of its wholly-owned subsidiary for as much as $3 billion in what seems likely to be India’s largest-ever IPO. No new shares will be issued. The lead managers are foreign investment banks Citigroup, HSBC, JP Morgan, and Morgan Stanley, and India’s Kotak Mahindra.

Sources: Statista data, Asia Times chart

Founded in 1996, Hyundai Motor India is also the country’s second largest auto manufacturer and a leading exporter. It operates two manufacturing plants near Chennai, capital of the southern state of Tamil Nadu, and another that it acquired from GM last January in the city of Talegaon, east of Mumbai in Maharashtra state.

At the time, Hyundai announced plans to invest another $4 billion in India (on top of about $5 billion invested already) to expand production to one million units per year. Building an electric vehicle business, including battery pack assembly and charging stations, is also on the agenda.

The proposed IPO, Hyundai Motor’s strategy in India and its overall performance have been received favorably by investors. Its share price rose by nearly 6% after the IPO made the news on June 15 and is up nearly 40% year-to-date. Korean stock market analysts expect the listing of Hyundai Motor India to increase the valuation of the parent company, which is currently trading on a price/earnings multiple of only 6.2 times, in the calculation of Google Finance, compared with 8.4 times for Toyota and 24x for BYD.

For Hyundai Motor, India is a strategic growth market accounting for about 15% of its retail unit sales – nearly as large as Europe and more than double sales in China. Hyundai Motor India offers more than a dozen models, from low-priced compacts to all-electric SUVs, through nearly 1,400 sales outlets and with about 1,550 service points across the country.

Sources: Hyundai Motor unit sales data, Asia Times chart

India is the world’s third largest national market for motor vehicles and fourth largest for passenger cars, having overtaken Japan in the former category in 2023 and accounting for about 6% of global passenger car sales that same year. China is the world’s largest national auto market, followed by the US. The regional EU market is about 2.5 times larger than the Indian market.

Sources: Data from European Automobile Manufacturer’s Association and F&I Tools USA, Asia Times chart

In percentage of unit sales, India is roughly 2.5 times more important to Hyundai than it is to the global auto industry. Furthermore, the gap appears likely to widen as Hyundai Motor India expands and upgrades its facilities, aiming for a higher value-added product mix in the domestic market while also serving as a relatively low-cost export base.

Hyundai affiliate Kia, on the other hand, plans to turn China into an export base for electric vehicles, starting with its EV5 compact SUV. Exports of the previously China-only model to Thailand and Australia began in May; the Middle East will be next. Kia is also making electric SUVs in the US state of Georgia, playing both sides of the US-China trade dispute.

In South Korea, Hyundai, Kia and their smaller domestic rival KG Mobility (Ssangyong Motors) had more than 80% of the market in 2023, leaving the rest to BMW and Mercedes, the local operations of GM and Renault and more than 20 other imported models. BYD is planning to enter the Korean market this year, but is likely to find it a difficult nut to crack.

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