Hyundai Motor and Kia Motors, the auto-making units of Hyundai Motor Group, the second-biggest conglomerate of South Korea, said Wednesday that they will invest 250 million U.S. dollars into Grab, Southeast Asia's largest ride-hailing company.
It was part of Hyundai's efforts to break into the mobility services industry, which involves ride-sharing, ride-hailing and taxi-hailing. With the rise of the sharing economy, it emerged as a lucrative business model in the car industry.
"We'd like to turn Hyundai Motor into a smart mobility solutions provider. Its keyword is services," said Chi Youngcho, chief innovation officer (CIO) of Hyundai Motor Group and head of the group's strategy and technology division.
Hyundai launched a first step toward its transformation last year by establishing the strategy and technology division, tasked with coping with a rapid paradigm shift in the automotive industry and finding new growth engines.
The traditional way carmakers make profit by manufacturing and selling vehicles "will not be sustainable soon," Chi told reporters. He said Hyundai will seek to provide recurring services in a bid to generate recurring revenue.
A new paradigm surfaced in the automotive industry as the trends crawl toward the sharing economy, under which consumers prefer sharing vehicles rather than possessing their own.
With the sharing economy, people will pay for mobility services and switch services providers online whenever they want. Under such circumstances, automakers could end up as subcontractors of mobile platform providers, such as Uber.
Chi said Hyundai will seek to develop its own capability for mobility services while making investments at the same time. "We will create a new business model through the combined chemistry of (mobility) services and vehicle sales," said the Hyundai CIO.
The Hyundai Motor Group and Grab, Southeast Asia's biggest online-to-offline mobile platform provider which took over Uber's car-hailing business and others in the region earlier this year, established a partnership to pilot electric vehicle (EV) projects across Southeast Asia.
As a first step of the EV partnership, which aims to improve EV adoption and awareness in Southeast Asia, Hyundai planned to supply about 200 EVs to enable Grab to launch the EV car-hailing services in Singapore in 2019.
Hyundai and Grab planned to expand such services later to other Southeast Asian nations such as Malaysia, Vietnam and Thailand because of Hyundai's competitive edge in the EV technology and the young generation of the region who are already familiar with mobility services.
In addition to the mobility services, Hyundai's strategy and technology division is focusing on four more new business areas robotics, new and renewable energy, smart cities and artificial intelligence (AI).
Hyundai, Chi said, has made steady efforts to strengthen its robotics capability, especially in the industrial field, that can be combined with the AI to provide various robotic services such as delivery and factory work.
Transportation players are expected to take a lot of opportunities in smart cities, where it would be possible to sell a suite of transportation services under the connected environment.