Hyundai’s Beijing factory. Picture: REUTERS
Hyundai’s Beijing factory. Picture: REUTERS

Seoul — In the future of transportation, what would you get if you mixed the business models of Tesla, Google and Samsung Electronics with the budget of the world’s fifth-biggest vehicle maker?

Youngcho Chi is about to find out.

Hired from Samsung, Chi has assembled a team of 200 strategists and researchers at Hyundai, the 50-year-old South Korean car maker that fought its way to the top echelon of the auto world and is now struggling to stem flagging sales in some of its biggest markets. His job is to catapult Hyundai into the forefront of technologies that are upending transportation.

Late to the game, Hyundai is developing vehicles and software systems for a planned driverless taxi service to compete with both its traditional rivals like Nissan and General Motors, and tech companies such as Waymo, the unit of Google’s parent Alphabet that has vowed to offer fully autonomous cars for public use soon.

"The most urgent task for us is the mobility service," said Chi, chief innovation officer and executive vice-president in charge of Hyundai’s strategy and technology division, in an interview at his office in Seoul. "We’re a bit late, but the opportunity has not been completely shut down."

He has the backing of one of the world’s biggest industrial enterprises. Hyundai has said it will step up spending on research and development and expand co-operation. It opened a data centre in Guizhou province in China and a technology development centre in Silicon Valley in 2017, and plans to set up units to invest in start-ups in Israel and Berlin in 2018.

New strategy

Chi’s division will co-ordinate their activities, creating a blueprint to integrate everything from artificial intelligence to robotics to energy storage. In a break from its traditional go-it-alone strategy, the car maker has stitched up partnerships with Cisco Systems and Baidu for connected cars, and teamed up with SK Telecom and Hanwha Asset Management to set up a $45m fund to invest in artificial intelligence, smart mobility and fin-tech.

As the industry shifts away from conventional petrol-powered vehicles with drivers, software and vehicle-related apps are becoming key to the future for vehicles. McKinsey estimates revenue from mobile and data-driven services in transportation will jump to $1.5-trillion by 2030, fuelled by shared mobility and data connectivity services.

While Chi declined to say when the robot taxis will be ready, Koh Tae-bong, a senior analyst at Hi Investment & Securities Co. said Hyundai may not be able to commercialise a self-driving shared mobility service before 2021.

"In order to start a robotaxi business overseas, it is essential for them to have strategic partnerships with ICT companies such as telecommunications, map and big data firms, and have testing periods before rolling self-driving taxis on the road," Koh said.

To hasten its efforts, Hyundai may buy companies around the $50m-$100m scale that could bring in more expertise, said Chi, who previously led Samsung’s strategic planning team. Still, he ruled out an acquisition spree.

"M&A looks sexy on the surface and may boost a firm’s value in the short term, but we are not at that stage," Chi said, explaining Hyundai still needs to learn better integration. Hyundai may buy one or two small companies this year, and should they work out well, it may try bigger-sized deals in 2019, he said.

Playing catch-up will be hard. GM expects to have a fleet of its self-driving cars ready for a ride-share service in 2019, while Nissan has said it will test an autonomous ride-hailing service on public roads in Japan as early as March. Waymo, which has racked up the most autonomous test miles on roads, has said it is "really close" to putting customers in its vehicles.

Meanwhile, Hyundai has been battling declining sales in the US, where it lacks enough sport utility vehicle models to benefit from a boom. In China, its biggest market, political tension with South Korea sparked a consumer backlash, causing a plunge in sales in 2017. Hyundai is also under growing pressure from the South Korean government to improve corporate governance as part of a drive to reform the nation’s big family-owned conglomerates.

All of which puts Chi and his team under pressure to succeed quickly.

"Speed is crucial in every aspect," said Chi. "I am asking my colleagues to report a task in a day which used to be done in a week."

Bloomberg

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