Hyundai Motor Group, South Korea’s automotive giant, is at a crossroads. As it races to restructure its sprawling business empire and regain lost ground in China, the company faces mounting challenges from labor unions at home and fierce competition abroad. Recent developments reveal a group navigating complex internal reforms while also attempting to adapt to a rapidly shifting global market—especially in China, where fortunes have dramatically changed over the past decade.
In South Korea, Hyundai Motor Group’s long-running strategy of splitting its parts subsidiaries into distinct manufacturing entities is coming under new scrutiny. According to 뉴스토마토 and other industry sources, this approach, intended to provide greater flexibility for business restructuring and to reduce risks associated with illegal dispatch controversies, may now be backfiring. The catalyst? The recent enactment of the so-called ‘Yellow Envelope Law’—an amendment to the Labor Union and Labor Relations Adjustment Act—which has fundamentally altered the labor landscape for conglomerates like Hyundai.
The law, which took effect in early 2026, allows companies that exert substantial influence over working conditions to be recognized as employers, regardless of direct employment contracts. This means that main contractors, such as Hyundai Mobis, could be compelled to negotiate directly with unions representing workers at their subsidiaries if it’s determined that they have meaningful sway over production schedules or personnel decisions.
That’s not just a hypothetical risk. On March 10, 2026, the unions of Hyundai Mobis subsidiaries Unitus and Hyundai IHL demanded direct negotiations with Hyundai Mobis itself, opposing the planned sale of the company’s lamp business. As reported by 뉴스토마토, this marks the first major test of the new law for Hyundai’s parts empire. The unions’ move has sparked broader concerns that the group’s strategy—carefully cultivated over years—could unravel if more subsidiary unions follow suit.
Hyundai Mobis, for its part, has been aggressively pursuing business restructuring. Since 2022, it has spun off production into subsidiaries Motras and Unitus, aiming to streamline operations and make future sales, mergers, or share reorganizations easier. The idea was that by separating production into legally distinct entities, the main company would be less exposed to labor disputes and more nimble in executing structural changes. The approach also responded to longstanding criticisms about illegal dispatch practices, as separating employment and management chains makes it harder to prove direct control by the parent firm.
The strategy wasn’t unique to Hyundai Mobis. Since Chairman Chung Eui-sun took the helm in October 2020, Hyundai Motor Group has expanded this model across its parts subsidiaries. Hyundai Transys spun off its powertrain production into Tranics, while Hyundai Wia created new production entities such as Mobient and Techgen. Industry analysts see these moves as a continuation of the group’s failed 2018 governance restructuring, which had aimed to untangle complicated cross-shareholdings and solidify control at the top, particularly through Hyundai Mobis and Hyundai Glovis. That earlier plan collapsed amid controversy over merger ratios and investor backlash.
But the new labor law has introduced a significant wrinkle. If labor commissions or courts determine that Hyundai Mobis or other parent companies still exert real influence over the day-to-day working conditions at their subsidiaries, they could be forced into direct negotiations with those workers’ unions. As 뉴스토마토 notes, “Whether subsidiary union demands for main contractor negotiations are accepted depends on the degree of influence the headquarters exerts over production and working conditions and interpretations by labor commissions and courts.”
Meanwhile, Hyundai Mobis is not only dealing with labor challenges at home but is also making dramatic moves abroad. In December 2025, the company sold all its shares in its Chinese subsidiary, Changzhou Hyundai Mobis Automotive Parts, to a local firm. This decision, detailed in the company’s business report and covered by 뉴스토마토, reflects a broader shift away from unprofitable operations in China. Instead, Hyundai Mobis is doubling down on its European production bases, especially in Hungary, where orders from global automakers like Volkswagen are surging.
These moves are part of a dual-track strategy for the group. While Hyundai Mobis rationalizes its business and focuses on profitability, Hyundai Motor is attempting a bold comeback in China. After years of declining sales—plummeting from over a million vehicles annually in the mid-2010s to less than a 1% market share following the 2017 THAAD missile defense dispute—Hyundai Motor is betting big on electric vehicles and localization.
In 2025, Hyundai Motor launched the China-specific electric SUV ‘Ilexio’ and began a major push to rebuild its shattered sales network by recruiting more dealers. In a symbolic move, the company appointed Li Fenggang, a Chinese national, as the new head of Beijing Hyundai, marking the first time a local executive has led the joint venture in its 23-year history. This shift is meant to accelerate the localization of not only products but also management, as Hyundai seeks to reconnect with Chinese consumers.
Looking ahead, Hyundai Motor plans to introduce six China-exclusive electric vehicles by 2027, signaling a medium- to long-term commitment to regaining relevance in the world’s largest auto market. President Jose Munoz has been candid about the challenges, publicly declaring in 2026 that the company will overhaul its China business. He acknowledged the steep decline in market share since 2017 but emphasized Hyundai’s determination to “actively reassess and restructure” its operations in China.
Industry insiders see the group’s diverging strategies in China as two sides of the same coin. While Hyundai Motor is betting on a focused, high-stakes recovery in a market now dominated by local giants like BYD, Hyundai Mobis is shedding unprofitable ventures and redirecting resources to where returns are more promising. As one industry source told 뉴스토마토, “Rather than overextending in a market now led by local players, Hyundai is aiming to protect profitability and seize niche opportunities through localization.”
At the heart of these maneuvers lies a deeper challenge: governance. Chairman Chung’s personal stake in Hyundai Mobis is just 0.33%, but to resolve the group’s circular shareholding structure—a legacy issue that has dogged the conglomerate for years—he would need to boost his shareholding to 24.7%. Without restructuring, acquiring the necessary shares would cost nearly 9.19 trillion won at current prices, and possibly up to 11 trillion won when factoring in control premiums and potential stock surges. That’s a staggering sum, underscoring why business reorganization remains a top priority.
Whether Hyundai’s restructuring gambit succeeds will depend on how Korean regulators, labor commissions, and courts interpret the group’s real influence over its subsidiaries, as well as how effectively it can adapt to the new realities of the Chinese and global automotive markets. For now, the group finds itself balancing on a knife’s edge—caught between the need for internal reform and the relentless pressures of international competition.
As Hyundai Motor Group charts its next steps, the stakes could hardly be higher for its workers, shareholders, and the broader South Korean economy.