Organic growth plans

Last year (2005) was a good one for Hyundai Heavy Industries Europe (HHIE) - the company, which launched into the European construction equipment market just over a decade ago, recorded a +40% increase in sales. The company is confident of continuing its strong growth trend with good results in 2006 and has plans to expand its business to produce further double digit gains in 2007.

Since launching into Europe, Hyundai’s construction equipment business has gone from a standing start to become the market leader in parts of Eastern Europe. But Hyundai managing director J W Hwang has plans to grow the company’s European business and hopes that its current 4% market share will have increased to 10% by 2010.

“It is not going to be an easy target to reach,” Mr Hwang told CE. “But the key to achieving our aims will be expanding our product range, as well as targeting Europe’s key construction economies and tapping into growing sectors, such as rental.”

Most companies with similarly ambitious growth plans would be looking at the merger and acquisitions market for companies which fit with Hyundai’s growth plans. But Mr Hwang is adamant that Hyundai’s future will involve organic growth and the new machine ranges will come from internal research and development work.

“We are not ruling out any acquisitions in the future but our strategy focuses on using our research and development facilities in Korea to develop our own designs,” said Mr Hwang.

Internal Development

This year the results of Hyundai’s internal development resulted in the launch of the new 50 tonne R500LC-7A excavator and 30 tonne HC780-7A wheeled loader at Intermat in Paris, France. In 2007 Hyundai is expected to extend its excavator range further with the unveiling of an excavator in the 75 to 80 tonne weight class and the first, in what is expected to become a full range, of short tail swing excavators.

Mr Hwang is keeping tight lipped about the exact specification of the new machines but the company hopes to have the new models ready to debut at next year’s Bauma exhibition in Munich, Germany. CE caught a distant glimpse of the new large excavator undergoing testing during a recent visit to Hyundai’s production facilities in Ulsan, South Korea. But the machine was hidden from full view by both the distance and by other excavators, giving few clues as to the final specification of the new heavy weight excavator.

Hyundai complete the roll out of its dash-7A series of excavators, which all feature Stage IIIA compliant engines, during 2007.

In addition, negotiations are underway to add a Hyundai branded demolition specification excavator to the company’s product range in 2007. The high reach excavator has been developed by Hyundai’s Spanish dealer Biurrarena to meet the needs of its customers in Spain and Hyundai hopes to be able to offer the modified machine, under the Hyundai name, to customers elsewhere in Europe.

The machine is based on Hyundai’s 45 tonne R450LC-7 and will have a maximum 26,3 m vertical reach and a 14 m horizontal reach. According to Biurrarena, the boom can be fitted on machines with an operating weight of 36 to 48 tons (32 to 43 tonnes).

Biurrarena divisional director José Ramón Telleris Suinaga told CE, “The boom has a modular design which means that it can be dismantled for transportation. But it can also be shortened to allow demolition at different working heights and for the machine to be used as a conventional excavator.”

Other equipment likely to be added to Hyundai’s European line up over the next few years includes backhoe loaders, more mini excavators and a wider range of short tail swing excavators.

The company is looking to introduce its skid steer loader range into Europe in the near future. Hyundai already produces skid steer loaders for its non-European markets but the designs have not yet attained European approval. “We are hoping to gain CE marking for our skid steer range sometime soon,” said Mr Hwang.

Hyundai is also working on improving the functionality of its existing ranges too. “A lot of European operators prefer to use wheeled loaders with joystick controls and we are working on developing this type of system and the first models may be available from the end of 2008,” said Mr Hwang.

Growing Markets

According to Mr Hwang, increasing Hyundai’s product range is just part of the company’s strategy for growing its European business. “We are also focusing on improving our brand within key markets,” he said.

The Hyundai brand is well known in Eastern Europe - the company is the market leader in excavator sales in Bulgaria and records good sales elsewhere in the region. But Mr Hwang believes that there is room for growth in sales in terms of volumes in Europe’s five biggest construction economies, Germany, France, the UK, Spain and Italy, known as the Big Five. “Spain and Italy are currently our largest markets out of the Big Five - with sales of around 330 units into each country this year,” said Mr Hwang.

In 2006, Hyundai specifically worked on growing its business in France and worked closely with its French dealers to develop stronger relationships with customers in the region. The company also used this year’s Intermat exhibition in Paris to promote itself in the French market and it hopes to maintain the momentum developed this year with sales of 320 units in the region.

Mr Hwang intends to follow up the success of this initiative with a similar campaign in Germany and use next year’s Bauma exhibition as a springboard. “In 2006 we sold 150 units in Germany but we are hoping to increase that to 300 units in 2007,” said Mr Hwang. “Germany is a hard market to break into - there is a very strong tradition of buying German-produced equipment but we are working with our dealers to make every effort to increase sales in 2007.”

Mr Hwang also believes that sales to the rental sector could be key to growing Hyundai’s share of the European construction equipment market. “We expect the European rental market to grow to 50% of machine sales in the near future and we are currently looking into the sector,” said Mr Hwang.

Supply And Demand

One area where Hyundai is leading the way in Europe is in delivery times. While many major manufacturers’ waiting times for popular mid-sized excavators runs at six to nine months, Mr Hwang said that Hyundai is delivering new machines within 3,5 months.

At present all new equipment is manufactured at Hyundai’s production facilities in Ulsan, Korea and shipped directly to the European headquarters in Geel, Belgium. But from next year, equipment bound for the UK will be shipped directly from Korea to Tilbury Docks. “Delivering UK stock directly to the UK will help to cut costs and also reduce lead times,” said Mr Hwang.

Hyundai is also looking into the possibility of establishing a production line for mid-sized excavators in Europe. “We are investigating the potential of setting up an assembly line in Eastern Europe, maybe by 2010, which we hope would initially produce around 1000 machines a year, with potential to increase with demand. The factory could also have the potential to serve the north African and Middle East markets,” said Mr Hwang.

“However, the issues surrounding establishing such a plant run deeper than just finding a suitable site with a good strategic location,” he said. “When Hyundai first set up in Europe, we had a production line in Belgium but the cost of producing machines there was +20% higher than in Korea because all the parts were being shipped from Korea for assembly in Europe.

“This time we are looking to keep costs down by sourcing parts within Europe but this could have quality implications for the finished machines. Maintaining quality standards is important to Hyundai, so resolving the cost issues is going to be critical to moving production to Europe.”

Good Prospects

Hyundai’s European factory and expanded product lines may be a longer term prospect but the company’s push for increasing sales is already making headway. “Excluding mini excavators, we are expecting sales in Europe in 2006 to top 2800 units,” said Mr Hwang. “But our forecasts for 2007 suggest sales next year will reach 3800 units.”