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Creta can't carry Hyundai forever; Korean giant risks losing No. 2 spot in India

New Delhi: The mood at Hyundai Motor India Ltd's office in Gurugram isn't exactly upbeat today. Passenger vehicle sales data for June were released on 1 July. And for the South Korean carmaker, once the No. 2 in India by some distance, it once again made for dismal reading. The company has finished behind Mahindra and Mahindra four out of six months this calendar year. Indeed, it has trailed the Indian company every month this fiscal year. And that is bad news for José Munoz. In January, Munoz, a native of Spain who is now an American citizen, became the first non-Korean to head Hyundai when he was elevated to the position of president and chief executive officer. His ascension was drowned out somewhat by the tumult in South Korea, which was still reeling from an abortive attempt to impose martial law on the country less than a month earlier. In March, Munoz made his first visit to India. Addressing a town hall at the company's Gurugram headquarters, he made it clear that the country was a priority market. "Hyundai is the second largest passenger vehicle maker in India, an important and growing market," he said. But his words did not age well given how Hyundai has kept finishing in the third or fourth place since he uttered them. Although the Indian unit, led by managing director Unsoo Kim, has tried to make a good impression on the new president, things haven't quite gone according to plan. So, what went wrong? Long, long ago, Hyundai had the Santro, which remained one of its top selling models for many years and helped it firmly grasp the No. 2 spot. And now it has the Creta. But aside from this mid-size SUV, none of the company's vehicles, including a short-lived relaunch of the Santro, have been able to make much headway in the Indian market today. The buzz inside the Gurugram offices suggests that the global products division in Seoul is squarely to blame for the Indian unit's struggles. The global division is being faulted for not coming with a product tailored to India, one that can help Hyundai regain its market share and recreate the Creta's success here. "From a product planning perspective, there is little the domestic unit can do. It can only give feedback. But internally, there have been questions over the product strategy for the Indian market," a senior executive at Hyundai India, who did not want to be identified, told Mint. The problem, he implied, lay with the product strategy and not the sales strategy. Despite its issues, Hyundai just about managed to hold on to its No. 2 ranking at the end of 2024-25, continuing a run that began in financial year 2009. But as things stand, it looks like the company will have to pull an (old) Santro out of its hat if it wants to retain that position on 31 March 2026. Despite the dark clouds looming over the company, Tarun Garg, Hyundai India's chief operating officer (COO), looked relaxed when he met with Mint at the company's Gurugram office. Asked about the stellar show by Mahindra and Mahindra and Tata Motors, he smiled and said, "Competition brings out the best in everybody." His relaxed demeanour aside, Garg, who became COO in January 2023 after four years in the company, finds himself in the hot seat. But he insists there are no alarm bells ringing. "At such high levels of management, there isn't so much worry about month-on-month fluctuations," he said. The COO says that what people fail to note is that Hyundai has managed to maintain its profitability amid the market share slide and stiff competition. "I think it is important to have a balanced approach. Yes, volumes are very important. Yes, the market share number two vision is very precious. But at the same time, profitability is also very important," said Garg. While the COO appears sanguine about the company's prospects, independent observers believe there are plenty of reasons for worry, especially with Hyundai's new products failing to gain traction. The company, they believe, became complacent as it didn't face any challenger for second place, behind Maruti Suzuki, for years on end. Now, it is paying dearly for that complacency. Hyundai's Indian rivals have finally brought their A game to the contest and reduced it to just another contender in a market with lukewarm four-wheeler sales. With its back to the wall, the Korean company's leadership is hoping to regain its position in the pecking order with a launch blitzkrieg that it hopes will accelerate growth. "One thing that stood out in the management's discussions was the performance of Mahindra. While both Tata and Mahindra have taken market share away, it is the latter which worries them more," said an industry insider who works closely with Hyundai India, on condition of anonymity. In March 2020, just as the covid-19 pandemic was about to erupt, Hyundai was comfortably in the second position in retail sales of passenger vehicles, with 465,522 units sold. Mahindra was a distant third in the same category with 212,797 units sold. A year into the pandemic, the Korean giant's sales had slumped to 414,204 units, while Tata Motors with 187,809 units, had risen to the third position. The distance between second and third positions, however, was still quite significant. But three years later, that yawning gap would become wafer thin. Mahindra, which only has SUVs in its passenger stables, reported sales of over 500,000 vehicles in 2024-25. That helped the company to close the gap with Hyundai from around 300,000 to less than 50,000 in four years. Hyundai was selling more than before, but so were Mahindra and Tata. And in 2025, they would start outselling the Korean company. Hyundai had a well diversified product range with hatchbacks Grand i10, Santro and Elite i20, and SUVs Venue, Creta, and a little bit of Kona and Tucson. But while it had a finger in every pie, the company's vehicles were not able to match the appeal of its competitors. The heavy lifting was done by the Creta, which accounted for 26% of its overall sales. The changing nature of the Indian market, which saw consumers preferring SUVs more and smaller cars less, affected Hyundai. From 23% in the financial year 2019, the share of SUVs in the overall car market grew to over 50% by the end of financial year 2025, as per industry data. Hyundai, however, recorded only a 2% rise in market share in the SUV space over that period, from 16.3% to 18.8%. "Since 2019, Hyundai has been cautious about investing in expansion in India and has moved slowly to capitalise on growth opportunities," said Puneet Gupta, director at S&P Global Mobility, a market intelligence firm. Although the company started rolling out new SUV models such as the Exter, Alcazar and Ioniq 5, they failed to find enough takers. "Hyundai never underestimated Indian consumers and was therefore very successful in the Indian market earlier. It was always among the first to introduce new features and innovations -- whether it was ventilated seats or SUV body design," said Gupta. "But Mahindra's rise, driven by the success of its SUVs, a radical shift in its offerings, and its strong command of rural markets, helped it tap into the growing demand for SUVs." Garg insists that Hyundai has responded to the changes in the market. "Our SUV contribution now stands at almost 68-69%. We were able to anticipate that the Indian customer is moving towards SUVs," he said. "Even at the cost of leaving some segments where there were volumes, we went to segments that were more futuristic, more aspirational, and where the modern Indian customer was really coming in." But the pivot may have come late. The biggest worry for Hyundai today is that it has lost a lot of market share in the mid-SUV segment, with flagship Creta's market share plummeting from 68% in 2018-19 to 30% in 2023-24. Maruti Suzuki's Grand Vitara, Toyota's Hyryder, Skoda's Kushaq and Volkswagen's Taigun have given the company a run for its money. It did not gain much ground in the large SUV space, with the Alcazar, a longer version of the Creta, receiving a tepid response. Nor is it going anywhere in the sub-compact SUV segment, with sales of the Venue stagnant. In a sense then, the company has no choice but to launch new vehicles. An internal assessment by Hyundai India from May, seen by Mint, implies as much, noting that its rivals' vehicles are doing much better. "HMI has the lowest new model/FMC (full model change) contribution at 2% among all major big volume original equipment manufacturer (OEM) players," the internal note admitted. The highest contribution from new models is in Mahindra's portfolio, at 28% in the first five months of 2025. Garg confirmed to Mint that Hyundai India's focus will be on getting new products into the market. To rectify what it has on offer for the Indian market, the company plans to launch 26 models till financial year 2030 -- 20 internal combustion engine (ICE) passenger vehicles and six electric vehicles. Hyundai is looking to introduce the luxury brand Genesis to tap the premiumization wave. Internally, it is also studying a potential launch for the Palisade SUV, which will compete in the large SUV segment, the two executives cited in this story told Mint. The company is leaning towards more SUV launches, including a re-launch for the compact SUV Santa Fe, which was discontinued in India in 2017 due to poor sales, one of the senior company executives added. In the electric vehicle space, which is gradually picking up, the company is finally going big with the Creta Electric, which was launched in January. Hyundai has to compete with Tata Motors, MG Motor India and Mahindra, which are ahead of it. But with China holding rare earth magnets, a critical component in EVs, hostage, questions are being raised about the viability of the industry. In particular, Tata Motors, the market leader, and Mahindra, have invested in EVs in a big way. "HMI looks at EVs as a long-term priority and hence, is focused on EVs not just for gaining volumes and share but would like to make this a profitable solution in India," analysts at Motilal Oswal Financial Services Ltd said in a 21 March note. But an internal assessment shows that the company is not relying on launches alone to recoup market share. In its June to December action plan, Hyundai has lined up special initiatives in rural areas, which includes increasing financing collaborations with banks, prioritizing dealers with inventory support and incentives, improving conversions of customers, and looking for opportunities for network expansion. The company is also expanding capacity. Last year, it acquired General Motors' Talegaon plant in Maharashtra and is looking to commence production this year. Hyundai already has two integrated plants near Chennai. But the competition isn't sitting idle. Mahindra has planned 12 car launches: seven ICE SUVs and five EVs. It is also looking to open a new greenfield plant by 2027-28 while increasing capacity for its new platform by 120,000 units per annum. "Once you are in the leading position, it is not easy to give it up. Mahindra will look to defend its market position as it has now gained an advantage," said Vinkesh Gulati, former president of the Federation of Automobile Dealers' Associations. Meanwhile, Tata Motors is also planning to launch new models, refresh much of its existing lineup to offer customers a more premium experience, introduce EVs in all price ranges, and invest in its service network. The company also has a new plant coming up near Ranipet, Tamil Nadu. Hyundai is leaning into its parent's strength, of having a vehicle in its global arsenal for every segment, be it ICE, electric or hybrid, to tap growth in the Indian market. "It has all the available powertrains in the market," Gupta explained. During the company's earnings call on 16 May, the management announced plans to have a hybrid vehicle by 2030. Hyundai has shunned India's hybrid lane so far. Unlike electric vehicles, which have a tax rate of 5%, hybrid vehicles have an effective tax rate of 43%. But state governments have now started softening their positions on use of hybrid technology. In Uttar Pradesh, the road and registration fees on hybrid vehicles have been removed. Delhi is also considering easing pressure on hybrid buyers and incentivising the purchase of such vehicles to promote a clean fuel future. And that is another area where Mahindra could be caught flat-footed. More than three fourths of the Indian company's sales come from its diesel variants. With carbon emission norms kicking in soon and the shift to cleaner mobility becoming important in global markets as well, Hyundai's diverse product portfolio can be a major advantage. "We are fuel agnostic. We are technology agnostic, which means we have everything. And that is a huge advantage of being part of the Hyundai Motor Group," gushed Garg. He is confident the Korean company will regain lost ground. "We know when to change gears. And we have done that in the past," he said, exuding confidence. But things may get worse before they get better. "Internally, the market share loss is expected to continue this year, before the new launch cycle kicks in," said the Hyundai India executive. In other words, Hyundai India may well end the year as No. 3.

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