Reducing pollution in industries that thrived the economic growth of a country – focusing on Hyundai Motors and Korea
Reducing pollution in industries that thrived the economic growth of a country – forefront in creating economic growth or major cause of environmental problems.
Economic Background
Korea is one of the few countries that experienced exponential economic growth from rapid industrialization – its nominal GDP per capita grew from $104 in 1962 to $5,440 in 1989, and reaching the $20,000 milestone in 2006[1]. Industrialization was particularly well-suited at the time and promoted economic growth through labor-intensive manufactured exports – primarily car manufacturing. The car manufacturing industry played a critical role in leading the growth as it exceeded 10% of national economy in the areas of employment, production and export by 1990s[2].
Hyundai Motors (“HM”), one of the largest car manufacturers in Korea, has continuously been in the spotlight in the past and also in current paradigm – for leading the economic prosperity during the late 20th century, and for attributing to environmental damage created by greenhouse gases during early 21st century. In order to mitigate the common phenomena, HM began two main initiatives – 1) switch to alternative fuels with lower greenhouse gas potentials, and 2) improve fuel economy in cars.
Mitigations proposed by HM_
Firstly, HM introduced Korea’s first non-polluting electrical car in 2012, and the world’s first fuel cell vehicle in 2013. The electrical car could travel 140 kilometers with 30 minutes of charging. The fuel cell cars could travel 594 kilometers with 3 minutes of charging. Also, fuel cell cars emit zero greenhouse gases while gasoline cars emit 130 grams of greenhouse gases per 1 kilometers[3]. Although majority of cars in Korea are still on gasoline, more hybrid cars are being distributed to the public due the continuous efforts from HM.
Secondly, HM also extended its efforts to improve the fuel economy in cars by leveraging different materials for chassis to create lightweight vehicles. Lightweight cars not only improve the fuel efficiency but also reduce exhaust gas as it reduces the running resistance and inertia of cars. HM applied alternative materials such as new steel material, aluminum, and magnesium composite material3.
Additionally, HM introduces a new environmental management system to reinforce their efforts of preventing environmental damage – such as implementing systematic management of energy consumption and greenhouse gas emissions. To be more specific, greenhouse gas management system responds to climate changes and control the discharge of pollutants whilst monitoring global environmental regulations and codes.
Additional Areas of Improvement
However, one of the areas that HM has yet to initiate is actually reducing the number of cars and their travel time[4]. This is an intriguing issue in which HM need to work in tandem with policy makers to dissect the root cause of the problem and provide feasible solutions for implementation – this is the most difficult area for HM since it directly conflicts it business objective of selling as many cars as possible.
In order to take the first step in providing potential solution, we could introduce a mark-up tax above the retail price of the gasoline cars so that actual consumers would be liable for the environmental damage caused by owning a gasoline car. In the same context, the government should provide subsidies for fuel cell cars, so that the general public have more incentive to purchase environmentally friendly cars as opposed to dominant gasoline cars.
Also, HM has yet to set up an environment fund to promote awareness for the environment and support other environmental initiatives through financial capital and strategic alliances.
The combined efforts of ‘fair’ tax and environment fund would fuel not only allocate potential costs to relevant parties, but also raise awareness within the general population to be more aware of environmental issues in general.
(618 words)
[1] ‘Economy of South Korea’, Wikipedia
[2] ‘Korea Automobile Industry’, Annual Report 2014, Korea Automobile Manufacturers Association
[3] Hyundai Motor Group Homepage (http://www.hyundaimotorgroup.com/)
[4] ‘Motor Vehicles and the Environment’, RFF Report, April 2003
Interesting perspective about motor industry!
I agree with your opinion that HM and governments should try to reduce the number of gasoline cars. However, as you mentioned in your post, it directly conflicts it business objective of selling as many cars as possible.
To evaluate effect of tax on gasoline cars and subsidies for environment friendly cars on HM, we need to figure out relative competitiveness of HM in those market segments. Do you think HM could maintain their current market status at the segment of environment friendly cars as well? If not, would initiating reducing the number of gasoline cars be right action for HM?
594 kilometers after 3 minutes of charging is mind blowing! Great post, Jaden. I think you make an interesting point about subsidies associated with fuel efficient, fuel cell, and gasoline powered vehicles. I believe that positive subsidies, such as a benefit for driving a low emission vehicle, are much more effective and less disruptive than a negative incentive such as a premium on top of gasoline prices. Although I have been working in oil and gas for the last four years, I plan to make my first car out of business school an emissions free vehicle. Given the rate at which batteries have been improving over the last two years, I am anticipating that the market will include several economic and efficient models by 2018.