Korea Automobile: Key Takeaways From The 2019 Seoul Motor Show

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Includes: BAMXF, DDAIF, GM, HYMTF, KIMTF, RNLSY, SKM, TSLA
by: Hyundai Motor Investment & Securities
Summary

The 2019 Seoul Motor Show showcased an improving mix and new model strategies to recover domestic sales.

Cutting edge tech in green and autonomous vehicles was another focal point.

The auto industry is rapidly moving to establish an infrastructure to expand mobility services.

Major issues and conclusions

The 2019 Seoul Motor Show, despite the lack of a new perspective which confirms changing trends, did showcase the following: 1) an improving mix and new model strategies to recover domestic sales; 2) cutting-edge technologies characterized by green and autonomous vehicles; and 3) the auto industry’s move toward establishing an infrastructure to expand mobility services.

2019 will witness a series of new volume model launches (Hyundai Motor (OTCPK:HYMTF) Sonata and SsangYong Korando) as well as strengthening green car and SUV lineups, which should help improve product mixes and boost sales volumes.

Industry and stock outlook

There are concerns over Hyundai Sonata and potential SUV mix deterioration at Kia (OTCPK:KIMTF) Motors ( to dissipate. However, Sonata’s mass production will resume in early May; HEV and turbo models to help the company to achieve its 2019 domestic sales target of 80,000 units. The SP2 and Mohave to ease worries over Kia’s lineup and help improve its product mix in 2H19. SUV’s growing share of sales and increasing content to nudge up Hyundai Mobis’s (OTC:HYPLF) ASP and boost core parts sales. We recommend Mobis for its fat A/S margins and earnings visibility, Hyundai for its new model momentum in the near term.

2019 Seoul Motor Show showcases major carmakers’ new models and strategies

The three keywords that describe the show are sustainable, connected, and mobility. The theme was sustainable and intelligent mobility revolution; green evolution through sustainable energy, intelligent cars, a new vision of mobility. There were 162 finished car makers, auto parts suppliers and others, including Hyundai, Kia, SsangYong, and Tesla (TSLA). Exhibition: six Korean names and 15 foreign carmakers showcased 154 models, including 36 new cars.

36 new cars unveiled; focus is on domestic mix improvements and volume recovery

The strategic direction of Korean carmakers are model strategies to improve their domestic mix and recover volume. For Hyundai, the1H19 key model Sonata’s design philosophy, convenience features, and lineup expansion (HEV, turbo). For Kia, the Mohave can help improve the domestic SUV mix; a new SP2; and a new green concept car. For SsangYong, full-change model of Korando and plans to expand its green car lineup. Renault Samsung targets market share recovery by launching the XM3. And GM plans to expand its lineup, especially with SUVs such as Traverse, Colorado, and Tahoe

For technological development with green and autonomous cars green cars were a focus with the following drawing interest from attendees; Hyundai's Sonata Hybrid, Kia’s Imagine concept, SsangYong Korando hybrid, Tesla/Mercedes-(OTCPK:DDAIF)Benz (/BMW (OTCPK:BAMXF) green models, and Hyundai Mobis/BYD/JATCO green technologies. For autonomous driving/mobility, SK Telecom (NYSE:SKM), Mobis and Kia showcased cutting-edge technologies and concepts.

The brand highlights included Hyundai's Sonata Hybrid, 1.6 turbo lineup, Sonata Hybrid: improved mileage (by 10%), roof solar panel, annual mileage up by 1,300km, Sonata 1.6 turbo: parametric jewel pattern grille, 180 horsepower smart stream 1.6 turbo engine, eight-speed A/T.

Kia showed its Mohave Masterpiece and SP2 volume concept car, Mohave Masterpiece: Mohave F/L volume concept car, bold outer design change and cutting-edge convenience technology, SP Signature: SP2, a small SUV that shares the same platform with Hyundai’s Kona (worldwide debut), Imagine by Kia: crossover EV concept, logo change, 21 ultra-high pixel overlay display (Asian debut), R.E.A.D. system technology: short for real time emotion adaptive driving are expected to improve Kia’s SUV mix.

SsangYong unveiled its Korando full model change. The company plans to develop EV and hybrid models of the Korando. This would be Korea’s first semi-medium-size SUV EV targeting a 400km run on a single charge; development of hybrid model is also underway. New volume models should boost its market share. The company plans to expand its green car lineup of volume models

Renault (OTCPK:RNLSY) Samsung's XM2 Inspire production to begin in 1H20 at Busan factory, contributing to a recovery of utilization rate. Entering a new segment with a crossover SUV to help recover market share. The Renault Master Bus's domestic launch is scheduled for 2019 and the company revealed its EZ-PRO (autonomous car).

GM (GM) Korea's SUV-led lineup expansion should help recover its domestic market share. The Traverse (large SUV), Colorado (midsize pickup truck) to debut in 2H19, Tahoe (full-size SUV). The company's expanded lineup to be unveiled at the beginning of 2020. GM plans to reduce its dependence on sedans and strengthen its SUV lineup to overcome domestic issues and the previous model’s failure.

Mobis is gearing up to become a green/autonomous/mobility technology specialist- Displayed the parts for a mobility concept, motorization (bi-directional charger, 48V mild hybrid system), connectivity (KRELLL sound, digital cluster), and autonomous driving (intelligent headlamp, electronic power steering, parking assistance system). The company is widening the scope of business to cover not only actuators but intelligent auto parts and software.

SK Telecom showed a string of state-of-the-art technologies to help establish a mobility ecosystem. The company's autonomous-enabling technologies such as 5G modules, single photon LiDAR, HD map update; preparing to establish a mobility service. SK Telecom's widening business scope utilizing the synergy within the group from telecom infrastructure-based semiconductors to energy (battery) and automotive services.

Stronger lineup (volume models, green cars and EVs) to improve mix and boost volume

Concerns over the Hyundai Sonata and Kia’s SUV mix deterioration to dissipate going forward. Sonata’s mass production will resume in early May; the addition of HEV and turbo models should help Hyundai achieve its 2019 domestic sales goal of 80,000 units. The SP2 and Mohave should ease worries over Kia’s aging car lineup and help improve its product mix in 2H19. SUV’s growing share of sales and increasing content to nudge up Mobis’ s ASP and boost core parts sales.

We recommend Mobis for its earnings stability and Hyundai for its fast earnings recovery. We also like Mobis for its fat A/S margins and earnings visibility and Hyundai for its new model momentum in the near term.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Hyundai Motor Company is a passive shareholder in our bank.