Hyundai Capital Services’ overseas assets surpass 50 trillion won

For Banco Hyundai Capital Brasil (BHCB), which entered into operation in May 2019 in Sao Paulo, Brazil was an unfamiliar market. The way Brazilian consumers buy a car was different from that of the Korean counterpart. Whereas each brand sells its own cars in Korea, each dealership sells vehicles from different brands under the system called “multi dealer shops” in Brazil. It means the Banco Hyundai Capital Brasil managing each and every dealership is crucial.

The job wasn’t so much of a big deal for the Brazilian unit of Hyundai Capital Services (HCS), the headquarters in Seoul, given the company already was equipped with basic business models depending on how cars are sold in different countries around the world. Global operations can apply the right business model befitting their market conditions, based on Hyundai Capital Services’ experience of doing business in 10 countries worldwide.

Executives from 11 global operations of Hyundai Capital Services discuss global business strategies at a forum at the Korean headquarters in Yeouido, western Seoul in 2019.

“We have different business models according to market maturity, size and how cars are sold,” said a Hyundai Capital Services spokesperson. “Each global entity may flexibly choose and apply the optimal business model. Regardless of which market we enter worldwide, our standardized business models allow us jump into the new market right away.”

Record-high performance abroad in 2019

Hyundai Capital Services’ growth in the global market has been astonishing. Its combined financial assets at operations outside of Korea reached 50.8184 trillion won in 2019, 30 years after its initial global foray. The amount is nearly double the domestic assets at 29.6577 trillion won. Hyundai Capital Services’ overseas operations posted 766.3 billion won in income before tax in 2019, also a record high and almost triple the amount in 2011 at 275.7 billion won.

Ever since launching overseas business in the United States as Hyundai Auto Finance (changed to the current name in 1993) in 1989, Hyundai Capital Services has been expanding at a rapid pace. The Korean financial services arm of Hyundai Motor Group now operates in 11 countries worldwide including Germany, Russia, China, the United Kingdom, India, Canada, Australia, Brazil, and Singapore.

“Hyundai Capital Services has achieved outstanding growth in the financial industry where the level of globalization lags behind that of manufacturing sector,” said a Hyundai Capital Services spokesperson. “The company has leapfrogged into a ‘global financial company,’ not just one of Korean financial companies doing business abroad.”

Striking a balance between unified system and localization

Hyundai Capital Services’ such epic growth overseas was made possible by a thorough analysis of each local market.

“GPS Product,” launched in 2016 by Beijing Hyundai Auto Finance (BHAF), Chinese operation of Hyundai Capital Services, is a case in point. The financial product offers a higher credit limit to customers agreeing to install a Global Positioning System (GPS), which tracks the location of their car. GPS functions as a tool to monitor the conditions and location of a vehicle, a physical collateral for a loan.

“Given managing credits of individuals in China isn’t easy due to its large population and underdeveloped credit ratings system, managing customers’ credit required a lot of cost,” said a Beijing Hyundai Auto Finance spokesperson. “At the same time, customers have gained the benefit of using cars at reasonable costs.”

The GPS product turned out to be widely popular. Its sales surged in 2019 by 40 percent from a year earlier.

Global operations have created synergy by sharing their best practices, based on the premise that nimble localization based on previous experience is crucial to capture the minds of local customers. A reward program called Agent Based Risk Management is a good example. Launched at the headquarters in the latter half of 2018, the program classifies car dealerships according to how many cars they have sold and their delinquency rate and gives out incentives and penalties proportionate to the performance. That way, efficiencies at dealerships improved and sales also got a boost. Hyundai Capital America (HCA), a U.S. operation that implemented the program in 2019, saw the portion of Hyundai and Kia cars sold through Hyundai Capital America in a total pie increase 8 percentage points compared to the previous year. Hyundai Capital Services’ Germany, China, Canada and China operations have followed in the footsteps of the U.S. counterpart and Brazilian operation is also expected to do so by the year’s end.

Digitalization at auto financing sector has been gathering steam and Hyundai Capital Services is no exception. It is now poised to share its digitalization capabilities with overseas operations.

“Nearly 90 percent of loan application and review process has been done without human engagement at the Seoul headquarters since three years ago,” said a Hyundai Capital Services spokesperson. “Digitalization can slash costs and enhance customer service quality. The plan to expedite digitalization process at our entire global operations in the near term.”

Sixt Leasing acquisition, part of a long-term investment

Hyundai Capital Services currently operates three joint ventures in partnership with Santander, a Spanish global financial services company, in three countries. Beijing Hyundai Auto Finance (BHAF), its Chinese entity, is also a joint venture between Hyundai Capital Services and Beijing Automotive Industry, a Chinese state-owned enterprise.

Hyundai Capital Services chose to enter global markets by setting up joint ventures to increase synergy with local partners that know the market better and reduce the risk of entering a new market.

“We wanted to give more benefits to our customers by running our business in an efficient manner, rather than entering each market independently, which leads to unnecessary early-stage costs,” said a Hyundai Capital Services spokesperson.

Hyundai Capital Services’ localization is not simply about expanding the local markets. It is part of a crucial process to design and prepare for Hyundai Capital Services’ future strategy. To that end, Hyundai Capital Services has opted to acquire a local corporation or set up multiple operations in a single country. Against this backdrop Hyundai Capital Bank Europe (HCBE) acquired Sixt Leasing, a subsidiary of German multinational rent-a-car company Sixt SE on Feb. 23. It was the first time that Hyundai Capital Services’ global entity acquired a local financial company.

European leasing community was paying attention to Sixt Leasing as its online lease business was expanding in Europe and it was spearheading within the region the so-called “Mobility as a Service (MaaS market), hailed as an upcoming trend.

“A car subscription service or online car leasing business is already a global trend,” said a spokesperson with HCBE, “meaning the acquisition was for us to be more aggressive in response to the new trend.”

A similar strategy applied to “Beijing Hyundai Leasing,” established in 2019 in China. Having found sufficient potential for the Chinese leasing market to grow further, Hyundai Capital Services decided to launch leasing business in partnership with Hyundai Motor Holdings in China and Beijing Automotive Industry.

“Since individuals are restricted from car ownership due to the state vehicle emission limit policy, many prospective passenger car buyers are turning to the leasing market, which allows them to drive a car without owning one,” said a Hyundai Capital Services spokesperson. “Given that the global trend in the auto market is quickly transitioning from ‘buying’ to ‘using’ a car and China has been leading the trend, making a quick investment decision was indispensable.”

“Global One Company” breaks down national barrier

Hyundai Capital Services’ corporate culture of enabling the 5,300 employees at 11 operations around the world to work under the identical HR system also makes Hyundai Capital Services a global company in a true sense. The HR system allows local operations to hire employees with the best knowledge of the local business environment and culture.

Workers have a unified communication tool for synergy and introduction in 2016 of “Global Band” system made all of its operations around the world use the same job title tiers. Hyundai Capital Services also developed “Global Cube,” an integrated work system, in 2019.

Hyundai Capital has also been running various programs tailor-made for respective operations after taking into account their different cultural backgrounds. Proactive exchange of corporate culture can be spotted at joint ventures, in particular. Banco Hyundai Capital Brasil, for instance, has been actively using purple, mixture of blue and red colors, each representing Hyundai Capital and Santander, for corporate identity.

Workers of Banco Hyundai Capital Brasil, a joint venture between Hyundai Capital Services and Santander, poise for a photo in a purple-color T shirt at an event in Sao Paulo.

In a similar vein, Hyundai Capital Services has been running “Global Mobility Program,” which allows employees around the world to relocate to a different country and work at a local entity. More than 300 employees were able to pioneer a new career path through this program. The Global Mobility Program also contributed to sharing and spreading best practices across the globe.

“We try to come up with business strategies tailored to local markets according to market conditions or target customers,” said a Hyundai Capital Services spokesperson. “We are dedicated to increasing efficiency in communication among employees by putting in place unified work systems and sharing workplace cultures at the same time.”