Hyundai Motor Company Investor Presentation March 2014
Table of Contents 1. Executive Summary 2. Key Strengths for HMC 3. Future Strategies 4. Market Update by Region Appendix 1
1. Executive Summary
Executive Summary Current Outstanding Performance Prudent Future Strategies Strong Performance through the Cycle Value Growth Balanced Sales Growth and Diversified Portfolio Structural Improvement in Core Competitiveness Volume Growth Cost Structure Improvement Superior Performance Relative to Peer Groups Green Car 3
2. Key Strengths for HMC
1 Strong Performance Through the Cycle Steady Growth in Global Sales (Unit:: 1,000 vehicles) +5.2% and Strengthening Global Market Share 3,239 3,701 4,099 4,392 4,621 5.1% 5.1% 5.4% 5.7% 5.8% 4.0% 2009 2010 2011 2012 2013 Source : Retail sales excluding CKD sales 2008 2009 2010 2011 2012 2013 Source : IHS Global Demand July 13 Supported by Relatively Higher Brand value Growth than the Industry and Improving Residual Value of Vehicles 65% 61.7% (E) -7.4% -5.0% 9.3% 6.6% 8.1% 19.3% 24% 11% 12.4% 20.0% 55% 45% 46.5% 45.8% 59.8% (S) 59.5% (SF) 2009 2010 2011 2012 2013 Automaker Value Growth HMC Value Growth 35% 39.4% '08 MY '09 MY '10 MY '11 MY '12 MY '13MY Source : Interbrand Source : Company Data Elantra Sonata Santa Fe 5
2 Balanced Sales Growth through Global Manufacturing Plants 7 manufacturing plants ( ), 6 R&D facilities ( ), 14 direct sales subsidiaries ( ), sales in more than 190 countries globally 2013 Feb (YTD) 2014 Feb (YTD) (Unit: 1,000 vehicles) -5.1% 57 54 +4.8% -3.1% EU 174 183 +5.3% 96 93 China 98 103 US Korea -10.6% 84 75 Middle East and Africa -4.1% 58 56 India -0.2% 13 Feb 14 Feb 698 696 +2.8% 53 55 LatAm Worldwide (YTD) US Plant China Plant India Plant Czech Plant Russia Plant Source: Company data (Retail sales excluding CKD sales) Turkey Plant Brazil Plant 6
2 Balanced Sales Growth by Diversified Business Portfolio Geographically Diversified Portfolio (%) Marketable Product Mix 2 (%) Hyundai 16.7 18.9 14.6 31.4 18.4 Hyundai 55.3 18.3 18.9 7.5 VW 14.1 8.2 30.9 31.5 15.3 VW 61.6 19.4 12.8 6.2 1 Fiat 27.5 25.8 46.7 Fiat 70.9 1.23.9 24.0 Toyota 28.2 25.4 10.9 18.0 17.5 Toyota 40.1 15.6 31.1 13.2 Honda 18.5 42.2 5.0 27.9 6.4 Honda 45.9 18.5 34.1 1.5 0 20 40 60 80 100 0 20 40 60 80 100 Domestic North America Europe Asia Others A+B+C D+E+F RV Others Source: Company data for HMC 2012 Global Retail Sales, Competitor information from public filings (2012FY Earnings Results) 1. Others include 38.0% of Brazil sales 2. A+B+C=Compact+Sub-Compact+Mini; D+E+F=Mid-Size+Large+Luxury; RV=SUV+MPV, Others=PUP and others 7
3 Structural Improvement (Increased Resilience to FX Fluctuations) HMC has reduced its exposure to FX fluctuations and made efforts to reduce risk from FX fluctuations Portion of Exports from Korea Plant OP Margin & KRW/USD Exchange Rate Trend (Unit: KRW/USD) 1,276.4 48% 41% 41% 40% 29% 30% 30% 28% 25% 1102.6 1,156.3 1,108.1 1,126.9 1,095.0 8.8% 10.3% 10.0% 9.5% 71% 70% 70% 72% 75% 6.1% 52% 59% 59% 60% 3.9% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Korea Domestic & Overseas Plant Sales Export from Korea Plant HMC OP Margin KRW/USD Avg. HMC has implemented hedging, settlement currency diversification and improving export ASP to mitigate impact from FX Source: Company data * Hyundai OP margin for 2008-2009 based on K-GAAP, 2010 2012 based on K-IFRS 8
3 Structural Improvement (Utilization & Inventory) High global utilization and low inventory level enables the company to promote value pricing strategy. HMC Global Utilization Trend (Unit: %) HMC Global/US Inventory Trend (Unit: Month of Supply) 4 107.4 108.4 104.9 100.6 3 89.9 91.5 2.4 2 1.9 1 Aug-10 Apr-11 Dec-11 Aug-12 Apr-13 Dec-13 2008 2009 2010 2011 2012 2013 Overseas Inventory US Inventory Source: Company data/us Autodata 9
3 Structural Improvement (Value Pricing Strategy) With value pricing strategy, ASP continues to improve along with a decrease in overall incentive spending. Average Selling Price (ASP) by Export Market (Unit: USD 1,000) 18 US Incentive Trend (Unit: USD) 4,000 16 US$15,000 Export ASP CAGR: +6.0% 3,500 3,270 3,000 14 2,500 2,573 12 2,000 1,938 1,500 1,377 10 1,000 8 500 6 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 LatAm Middle East and Africa Asia Pacific Total Export Hyundai Industry US Big 3 Japan Big 3 Source: Company Data, US Autodata, ASP is based on HMC headquarter results 10
3 Structural Improvement (Brand Enhancement) Enhancement in Brand Value (Unit: US$ in Millions) (Ranks) Awards and Accolades Date Award Title Region Model(s) +20% 43 2013.09 Customer Satisfaction China Elantra, Santa Fe +24.9% 53 2013.08 Top Safety Pick Plus U.S. Elantra 2013.06 Vehicle Satisfaction Awards U.S. Genesis, Veloster 69 +9.3% 65 +19.3% 61 7,500 9,000 2013.04 Best Cars : Compact Category Brazil HB20 2013.03 Top Vehicles for Commuters U.S. Genesis 2013.02 13 Best Cars for the Money U.S. Santa Fe 4,604 5,033 6,005 2013.02 13 Car of the Year Canada Santa Fe 2013.02 Rank 1 st in VDS mid-size segment U.S. Sonata 2013.01 Future Auto Award 2013 Germany Ix35 FCEV 2012.11 Car of the Year 2013 Brazil HB20 2012.08 Car Buyer Car of the Year 2012 U.K. i30 2012.07 Company Car of the Year Germany i40 2009 2010 2011 2012 2013 2012.04 Car of the Year Russia Solaris Highest growth rate among automakers for two consecutive years Source: Interbrand, JD Power 2012.03 Best Auto 2011 Russia Solaris 2012.03 Best Value in America U.S. Accent, Elantra, Coupe and Tucson 11
4 Consistent Profitability Relative to Peers HMC has shown the most consistent operating performance relative to competitors during the past few years. Consolidated Operating Margin Trend 10.3% 10% 8.8% 9.6% 9.6% 11.7% 11.1% 10.8% 8.4% 6.1% 4.8% 6.9% 7.1% 6.0% 5.5% 5.8% 5.6% 5.9% 6.2% 5.7% 5.5% 4.9% 6.3% 6.4% 5.2% 5.1% 2.6% 0.9% 2.1% 1.8% 0.0% 0.6% -0.2% -3.7% -3.0% 2009 2010 2011 2012 2013 1H Source: Public Filings Note: Based on Consolidated Financials, Calendarized Financials for Japanese Firms * Hyundai Financials for 2009 based on K-GAAP, 2010 2012 based on K-IFRS 12
3. Future Strategies
Sustainable Success Going Forward Key Strategy for Ongoing Growth in Earnings Consistent revenue growth and enhanced profitability to be achieved through structural improvement in product/brand value, balanced capacity expansion and cost structure improvement Value Growth Volume Growth Cost Structure Improvement Green Car Higher ASP and Lower Incentive Driven by Enhanced Product and Brand Value Balanced Capacity Expansion and New Model Launch Higher Cost Competitiveness from Vertical Integration Develop Independent and Distinctive Technology 14
1 Value Growth (Product Competitiveness) Elantra, Sonata, and Santa Fe are experiencing high demand with better specification. Specification Comparison Elantra (Compact Sedan) Specification Hyundai Elantra ( 11) Toyota Corolla ( 09) Honda Civic ( 12) Displacement 1.8L 1.8L 1.8L Max. Power 148@6,500 132@6,000 140@6,300 Mileage 28mpg / 38mpg 26mpg / 34mpg 28mpg / 39mpg Sonata (Mid-size Sedan) Specification Hyundai Sonata ( 10) Toyota Camry ( 12) Nissan Altima ( 13) Displacement 2.4L 2.5L 2.4L Max. Power 198@6,300 178@6,000 182@6,000 Mileage 24mpg / 35mpg 25mpg / 35mpg 27mpg / 38mpg Santa Fe (Compact CUV) Specification Hyundai Santa Fe ( 13) Toyota RAV4 ( 13) Chevrolet Equinox ( 10) Displacement 2.4L 2.5L 2.4L Max. Power 190@6,300 179@6,000 182@6,700 Mileage 21mpg / 29mpg 22mpg / 28mpg 22mpg / 32mpg Source: Company Data 15
1 Value Growth (Higher ASP) Global Average Selling Price(ASP) is expected to continue its growth momentum going forward. Average Selling Price (ASP) Trend Global ASP (Unit: US$1,000) Domestic ASP (Unit: KRW in Millions) Overseas ASP (Unit: US$1,000) 15.7 23.6 14.8 15.2 23.0 14.0 3Q11 2011 3Q12 2012 2013 3Q11 2011 3Q12 2012 2013 3Q11 2011 3Q12 2012 2013 16
1 Value Growth (Higher Transaction Price) Transaction price of major models in US market has improved with structural improvement. Transaction Price Trend in US Market Compact Sedan (Unit: USD 1,000) Mid-size Sedan Compact CUV 19.9 19.4 23.1 24.0 22.9 28.3 18.6 18.9 18.9 18.3 18.0 21.6 21.1 22.8 22.3 25.4 25.3 23.5 15.8 15.5 17.6 22.6 22.3 4-Cyl, 2WD 2007 2008 2009 2010 2011 2012 2013 2014(P) Elantra Corolla Civic 2007 2008 2009 2010 2011 2012 2013 2014(P) Sonata Camry Accord 2009 2010 2011 2012 2013 Santa Fe RAV4 Equinox Source: PIN data (Annual average transaction price in US market) 17
2 Volume Growth HMC s global sales will be increased with capacity expansion and by maintaining high utilization rate. Capacity Expansion and Sales Plan Production Capacity Expansion Sales Plan by Plants (Unit: 1,000 Vehicles) 2012 2013 2014 (P) Chg (%) 2013 2014 (P) Chg (%) Korea 1,870 1,870 1,870 0.0 1,820 1,872 +2.8 US 300 370 370 0.0 399 390-2.3 China (BHMC) 900 900 1,050 +16.7 1,031 1,080 +4.8 India 600 600 600 0.0 633 600-5.2 Turkey 100 200 200 0.0 104 200 +93.2 Czech 300 300 300 0.0 304 300-1.3 Russia 200 200 200 0.0 229 228-0.5 Brazil 150 150 170 +13.3 167 175 +4.5 China (CHMC) 60 150 +150.0 45 55 +21.4 Overseas 2,550 2,780 3,040 +9.4 2,912 3,028 +4.0 Total 4,420 4,650 4,910 +5.6 4,732 4,900 +3.6 Source: Company data * Above sales figures are based on shipment ** BHMC : Beijing-Hyundai Motor Company / CHMC : Sichuan-Hyundai Motor Company 18
3 Cost Structure Improvement (Platform Integration) Platform integration will reduce development cost and realize greater economies of scale per platform. Platform Integration Integration Schedule Reduction of Model Development Time 2002 2009 2011 2013 Integrated Platforms 0 6 6 6 Total No. of Platforms 22 18 11 6 Total No. of Models 28 32 36 40 40 Avg. of 40 months 19 months 33 19 2002 2009 2013 No. of Models per Type of Platform Mass Production Niche Market Increasing portion of models with integrated platform 2011 2012 2013 Old 38% New 62% Old 25% New 75% Old 19% New 81% Small Mid-size Large Coupe Frame SUV LCV Source: Company Data 19
4 Green Car HMC independently developed and obtained distinctive technology on HEV system. Developing Green Cars: HEV Hybrid Vehicle Strategy Hybrid Vehicle Gradual expansion of HEV applied automotives (mid-size, SUV, heavy vehicles) Electric Motor Powered by advanced lithium-ion battery Parallel Hybrid Drive System Simpler in structure compare with other types of hybrid Enhancing fuel efficiency (Toyota level) Focusing on HEV system improvement and obtaining distinctive components technology Sonata HEV Displacement: 2.4l Max. Power: 206 hp Mileage: 34 / 40 mpg Commercial production: 2011 (US & Korea) HEV Performance Comparison Specification Sonata HEV Camry HEV Altima HEV System Power 206 hp 200 hp 198 hp Battery Li-PB 34kW Ni-MH 33kW Ni-MH 30kW Mileage (City/Highway) 36mpg / 40mpg 43mpg / 39mpg 35mpg / 33mpg Motor 30kW (40.2hp) 105kW (141hp) 105kW (141hp) System Parallel System Power Split System Power Split System Source: Company data 20
4 Green Car HMC has been chosen to participate in European FCEV demonstration program together with Daimler. Developing Green Cars: FCEV Fuel Cell Electric Vehicle Assuring FCEV Leading Maker position by participating in the demonstration program Major components are independently developed FCEV Stack The first auto maker to successfully begin series production several years ahead of competitors. Expected Production year HMC Toyota Honda Daimler 2013 2015 2017 2017 FCEV Vehicle Tucson ix FCEV Max. distance: 650 km Max. speed: 160 km/h Fuel Efficiency: 31km/l Commercial production: TBD Development Roadmap Major Participation in Demonstration Program Phase 1 (- 2006) Develop Stack Technology Santa Fe FCEV Tucson FCEV Fuel Cell Electric Bus Phase 2 (2007-2011) Improve Performance Tucson FCEV (2 nd Gen.) Mohave FCEV Fuel Cell Electric Bus (2 nd Gen.) Phase 3 (2012-) Commence Small Production Tucson ix FCEV Year 2006 2004 ~ 2009 2012 Program - Operated Demonstration program in collaboration with Korean Government - Participated North America FCEV demonstration program led by the U.S. Department of Energy - Participated FCEV demonstration programs operated by European Government(Norway, Sweden, Denmark, Iceland) Source: Company data 2013 - Began to deliver FCEV to city of Copenhagen, Denmark and Skåne, Sweden 21
4 Green Car HMC commenced supplying Blue On test models and is expected to develop mid-size electric vehicle in 2015. Developing Green Cars: EV Electric Vehicle Strategy Electric Vehicle Wait & See Strategy Considering government policies and market expansion opportunities Focusing on compact and mid-size vehicles, reviewing possibility for further market expansion Producing an optimized amount to minimize losses from US ZEV regulation and China s reinforcement policy on EV Blue-on EV Battery Capacity : 16.4 kwh Max. distance : 140 km Max. speed : 130 km/h Recharge Time : 6 hours Obtaining price / technology competency by localizing key components Commercial production: TBD Development Roadmap Launched first domestic Blue On electric vehicle in Sep. 2010 Localizing Key Components / Obtaining Distinctive Technology Supplied 30 Blue On test models to public institutions / local autonomous entities Supplied extra 256 Blue On vehicles to public institutions in 2011 Expected to launch Elantra (New Model) Electric Vehicle in 2015 Source: Company data Specification Motor Battery On Board Charger Contents - Highly efficient (Firstly developed in Korea) - Strengthened rigidity for fast rotation minimizing noise - Lithium-ion polymer battery launched - Improvement of Stability : Complex design which considers safety when overcharged or crashed - Charging high-voltage battery through rectifier and by raising voltage of AC power supply to electric transformer - Utilization of Shield system : Preventing noise of electric device from outside 22
4. Market Update by Region
Korea Sales and M/S Trend (Retail Sales) (Unit: 1,000 vehicles) Market Strategy 1,464 1,474 1,411 1,383 New Model Launch Genesis (Nov 2013) : Targeting luxury market with all new model to improve profitability and brand 45.0% 46.4% 47.3% 46.4% Sonata (1H 2014) : Enhance sales volume with a full model change of our key model 2010 2011 2012 2013 Industry M/S Grandeur Diesel (2H 2014) : Add diesel models to large passenger vehicle 682 658 667 641 177 185 162 161 77 94 112 135 226 250 231 209 161 170 162 136 Corresponding Measures on Increase of Imported Vehicle Enhanced Credibility Test drive for comparison with imported model Develop options for domestic customers Improve Premium Image Diversify product line up and Power train Upgrade and expand sales/ service network Expand Diesel Line-up Enhancing Diesel Line-up (e.g. Avante, Grandeur) in the domestic market to improve competitiveness 2010 2011 2012 2013 Source: KAMA, Company data CV RV Med + Large PC Small PC 24
United States Sales and M/S Trend (Retail Sales) (Unit: 1,000 vehicles) 11,590 4.6% 12,778 5.1% 4.9% 14,492 15,600 4.6% Market Strategy New Model Launch Genesis (1H 2014) / Sonata (2H 2014): Enhance Premium segment volume to improve brand image and maintain a strong sales growth momentum in non-premium segment with new model launches Premium PC Sales 2010 2011 2012 2013 Industry M/S 5.6% 6.3% 7.6% 7.8% 7.1% 7.1% 5.7% 6.1% 22,687 538 125 646 131 264 703 721 128 131 277 282 13,604 16,448 18,850 19,804 229 184 251 298 308 3,193 3,972 3,578 2010 2011 2012 2013 Source: Company data RV Med + Large PC Small PC 2009 2010 2011 2012 2013 Genesis Equus Genesis M/S Equus M/S 25
Europe Sales and M/S Trend (Retail Sales) (Unit: 1,000 vehicles) Market Strategy Focus on qualitative growth 15,332 15,264 13,960 13,724 Improve sales capability by strengthening finance services and introduce facelift model of ix 35 and all new i10 2.4% 2.6% 3.2% 3.0% Expand dealer exposure to major cities and improve facilities of existing dealers Improve corporate fleet sales through strengthening fleet sales units 2010 2011 2012 2013 Strengthen marketing with ix35 FCEV and participation of WRC Industry M/S 403 362 20 8 80 139 117 102 444 43 145 109 405 30 134 100 Expand Direct Distribution Coverage 2011 2012 Indirect 57% Direct 43% Indirect 31% Direct 69% 157 142 147 141 2010 2011 2012 2013 A+B seg C seg RV D seg & Others Direct distribution coverage As of 2011: UK / Spain / Italy / Norway / Czech / Slovakia / Poland Newly established in 2012: Germany / France Source: Company data 26
China Sales and M/S Trend (Retail Sales) (Unit: 1,000 vehicles) 11,120 11,935 12,720 15,165 Market Strategy New Model Launch Mistra CF (2H 2013) : Expand model line-up with customized model to improve customer profile and brand perception Sonata HEV (2H 2013) : Launch Eco friendly model to enhance brand image 6.3% 6.2% 6.7% 7.0% Dealer Enhancement Plan 2010 2011 2012 2013 Industry M/S 1,031 720 800 860 856 284 600 704 740 120 154 65 113 172 117 136 519 472 567 611 2010 2011 2012 2013 Number of Dealers 2010 2011 2012 2013 Source: Company data * Market demand based on Passenger Vehicle SUV Mid-size PC Small PC Focus on improving customer services and brand image 27
India Sales and M/S Trend (Retail Sales) (Unit: 1,000 vehicles) 2,309 2,430 2,656 2,461 15.4% 15.4% 14.7% 15.4% 2010 2011 2012 2013 604 615 Industry M/S 641 633 Market Strategy Expand export sales through geographical diversification Expand export sales in Middle East / Asia Pacific regions % of exports: 38% (2012) 40% (2013) Increase ASP in response to the weakness of Rupee Increase by INR 4,000 20,000 Enhance brand equity and improve profitability by offering lower incentives than its peers Industry average: $583 HMC average: $318 New Model Launch (Grand i10 in Sep 2013) Entrance to the Indian compact-mid market Compete with Ford FIGO 247 242 250 253 Specification Comparison 357 373 391 380 Grand i10 FIGO Displacement 1,200cc 1,200cc 2010 2011 2012 2013 Export Domestic** Source: Source: SIAM, Company data * Market demand based on Passenger Vehicle ** Sales data based on factory sales Max. Power 83ps / 11.6 tq. 71ps / 10.4 tq. Mileage 18.9km/l 15.6km/l MSRP INR 429K ~ INR 612K INR 427K ~ INR 632K 28
Other Emerging Markets Achieving a consistent sales volume growth over the years. Africa-middle East and LatAm Sales Breakdown by Major Emerging Markets Sales Volume (000 s) and CAGR (%) Asia-Pacific 3.6% LatAm 8.0% Turkey 1.1% Africa-ME 185 208 253 292 316 419 448 +13% 482 495 Africa-Middle East 10.7% Korea 13.8% 2005 2006 2007 2008 2009 2010 2011 2012 2013 LatAm +15% N. Am. 18.6% 363 Chindia 30.5% Europe 13.8% 115 128 2 7 165 25 177 185 37 67 237 258 268 80 85 80 188 Source: Company Data, 2013 HMC Global Retail Sales (excludes CKD sales) 2005 2006 2007 2008 2009 2010 2011 2012 2013 South America Brazil 29
Appendix
Balance Sheet (K-IFRS Consolidated) (KRW in Billions) 2012 2013 Change Assets 121,538 133,422 11,884 Current Assets 54,848 58,856 4,009 Cash and Cash Equivalents 1 19,143 21,748 2,604 Liabilities 73,620 76,839 3,218 Current Liabilities 32,836 31,920 916 Short and Long-term Debt 45,207 47,967 2,760 Provision 7,009 6,906 103 Equity 47,918 56,583 8,665 Current Ratio(%) 167.0% 184.4% Debt/Equity (%) 94.3% 84.8% Net Debt 26,064 26,219 Source: Company filings (K-IFRS Consolidated) 1. Cash and Cash Equivalents = Cash + Short-term Financial Instruments 31
Income Statement (K-IFRS Consolidated) (KRW in Billions) 2012 2013 Growth Revenue 84,470 87,308 3.4% Gross Profit 19,502 19,448 0.3% Margin (%) 23.1% 22.3% SG&A 11,061 11,132 0.6% Portion (%) 13.1% 12.8% Operating Profit 8,441 8,316 1.5% Margin (%) 10.0% 9.5% Recurring Profit 11,610 11,697 0.7% Margin (%) 13.7% 13.4% Net Income 9,061 8,994 0.7% Margin (%) 10.7% 10.3% Depreciation 1,698 1,769 Amortization 823 782 EBITDA 1 10,961 10,867 Source: Company filings (K-IFRS Consolidated) 1. EBITDA = Operating Profit + Depreciation + Amortization 32
Financial Summary by Division (KRW in Billions) 2012 2013 Growth Sales Revenue 84,470 87,308 3.4% Automotive 71,307 71,535 0.3% Finance 8,663 9,893 14.2% Other 4,500 5,880 30.7% Operating Profit 8,441 8,316 1.5% Automotive 6,719 6,413 4.6% Finance 1,178 1,120 4.9% Other 255 388 52.6% Consolidation Adjustment 289 394 36.3% Source: Company filings (K-IFRS Consolidated) 33