Hyundai Electronics to foray into Indian consumer durables market

It is not easy to break into a market that has more than two dozen players in the fray — with a majority of them around for at least a quarter of a century. A new entrant can either hope to break through the ranks with technology-led products or play the price card to disrupt the market. As Hyundai Electronics, an arm of Hyundai Corporation, makes its debut in India’s Rs 1trillion (source: India Brand Equity Foundation) consumer durables market, it hopes to make the most of the strong technology pedigree enjoyed by South Korean multinational. The company has rolled out a wide array of products including television sets, washing machines and refrigerators. In the first phase of the launch; it plans to cover markets such as Maharashtra, Uttar Pradesh, Rajasthan, West Bengal, Delhi, Madhya Pradesh, Orissa in this leg.

The consumer durable market in India is probably the most crowded globally. Global behemoths like Sony, LG, Samsung and Whirlpool dominate the high-end segment while another dozen-odd brands crowd the mid-to-lower end of the market. So is there space one more player? What will Hyundai Corporation do to swing the needle?

Akshay Dhoot, CEO, Hyundai Electronics

“There are a lot players in the market but they are simply trading. Only a handful of brands are engaged in meaningful R&D. There is a gap in the market particularly in the technology-powered smart products space. We are looking to tap these segments by offering consumers products powered by the internet of things and artificial intelligence,” says Akshay Dhoot, chief executive officer (CEO), Hyundai Electronics.

Hyundai Electronics sees immense headroom for growth in the consumer durable industry which is expected to grow to Rs  3 trillion by 2020, at 41 per cent CAGR between 2017 and 2020. It is estimated that India would be the 5th largest consumer durables market in 2025 from being the 12th largest currently. Dhoot and his team are looking to break through the clutter by focusing on under-penetrated categories such as ACs, washing machines and refrigerators. The penetration rates of ACs, washing machine, and refrigerator in the country currently stands at 5, 18 and 10 per cent respectively. 

“With the increase in purchasing power and the desire for an aspirational lifestyle, buyers are no longer looking at products like ACs and washing machines as luxuries; rather these are considered a necessity. All these factors are giving a fillip to the consumer durable market,” says an observer. 

Given that multinational companies like LG, Samsung and Sony are the flag bearers of technology, positioning and pricing will be key in determining Hyundai Electronic’s fortune in India. Talking about the company’s product and pricing strategy, Dhoot says “We are positioning ourselves at the lower-end of the premium segment. We are not going to have a play in the affordable segment.” 

For example, Hyundai Electronics is offering a 32-inch LED TV at Rs 13,000 but as consumers upgrade and go for a smart TVs, the company’s 55-inch 4k TVs come with a price tag of Rs 47,000 to Rs 50,000. The pricing appears competitive as similar product from the house of a Samsung and an LG cost upwards of Rs 70,000. 

Anil V Pillai, director, Terragni Consulting, says, “With players like LG and Samsung dominating the premium-end of the market, the lower-end of the premium market appears to be a sweet spot for Hyundai Electronics to be in. The debutante has an advantage in the lower-end as it is backed by Hyundai Corporation, a global player known for its strong technology pedigree.” The company would do well to tap the huge growth potential offered by tier ii and tier iii markets. Pillai suggests Hyundai must address the infrastructural limitations presented by rural markets. The company can leverage technology to offer power-efficient products in markets struggling with electricity shortage. 

The company has chosen its debut markets carefully. Dhoot says choosing a market like Maharashtra is imperative for a new player as the state is the largest consumer of durable goods and electronics. It is also a market where buyers exhibit high propensity to try out new brands. Again, Hindi-speaking states like UP, Delhi, Madhya Pradeh provide the company with the opportunity to standardise its brand pitch and communication message. 

Taking cognizance of the value-conscious buyer and the critical role played by after-service in influencing Indians’ purchase decisions, Hyundai Electronics has tied up with Flipkart-backed customer service and assistance company Jeeves. 

The company is working on ramping up its distribution network by appointing multi-brand distributors in every state. “Getting display space at multi-branded stores dominated by leading players is not going to be easy for the company. It will have to incentivise dealers adequately to be able to create display space for itself in stores,” says Pillai.

The company will manufacture 90 per cent of the products on offer in India. It has outsourced manufacturing to third-party vendors like Nainko and Phoenix. It plans to import a few high-end premium products in the CBU (completely built unit) form. It aims to corner 3 per cent market share over the next 12 month with a turnover of  Rs 575 crore.