Hyundai not one to waste a recession

Models like the i20 are helping reinforce Hyundai's value for money reputation. Photo / Supplied

The recession precipitated one of the most tumultuous years ever for the United States car business, but to Hyundai, it may have presented the perfect opportunity.

On Tuesday, when car companies announce their latest sales figures, the South Korean carmaker that was once an industry laughing stock will announce its best retail month ever and that despite the vast shrinkage of the US market, it expects this year's sales to exceed last year's.

Just as McDonald's and Wal-Mart have found favour from consumers during the recession, so too is Hyundai benefiting from its cut-rate allure, analysts said. Having largely shaken off a reputation for quality problems that arose after its US launch in 1986, Hyundais look like a deal to many consumers.

"Value-focused brands tend to do better than premium brands during difficult economic times, and that's played to our natural strength," said John Krafcik, Hyundai's president in North America.

While the company is far from dominating the American market, the US share of Hyundai-branded vehicles climbed from 3.6 per cent last July to 4.6 per cent this July. Globally, the Hyundai-Kia Automotive Group has jumped to fourth in sales, climbing ahead of Ford this year, according to the Automotive News Data Center.

Industry observers attribute the company's relative success this year to its reputation for value and the fact that it has been quick to exploit the openings created by the shifting market and turmoil at US carmakers.

When General Motors' troubles forced it to scrap its Academy Awards advertising, Hyundai moved in as the show's lone automotive sponsor.

When recession-beleaguered customers seemed too fearful to make a big purchase, Hyundai was the first of the major carmakers to offer insurance so that a buyer who lost his or her job could return the car.

And when other carmakers waited to take advantage of the federal Government's "Cash for Clunkers" program - waiting, for instance, for bureaucrats to spell out the rules - Hyundai jumped in and beat others to the game, telling dealers it would advance them the money to buy up clunkers while they waited for government reimbursements to arrive.

Its Elantra was the fifth-best-selling car in the $3 billion federal incentive program.

"For Hyundai, a recession would be a terrible thing to waste - and they're not," said Jeremy Anwyl, chief executive of the auto research site Edmunds.com. "They're delivering. They're having a hell of a year."

At the same time, the company appears to be at a crossroads.

For even as it is exploiting its reputation as a brand that offers a good deal, the company is attempting to promote a new luxury sedan, the Genesis.

In this, it is trying to copy the success of Honda and Toyota, which may have begun as cheap imports but have since moved into far pricier territory.

Krafcik said he believes the brand may be at an "inflection point."

Hyundai suffered from some shoddy car production during the 80s, and among many consumers, those troubles left a lasting impression. Even now, when people buy a car online, Hyundai buyers take the longest time, presumably to gather information to answer skeptical peers, Krafcik said.

But since those troubles, Hyundais have garnered accolades for quality, and the company is now touting the Genesis as its answer to Mercedes, Lexus and Cadillac.

For some, a luxury Hyundai may seem like an oxymoron. But earlier this year, it won North American Car of the Year at the Detroit car show, and that has helped boost sales, as well as the brand's image. Even so, many analysts question whether Hyundai can at once be the bargain brand and one that provides luxury.

"Surveys show that people who buy Hyundai say their reason is 'good value for the money'," said Phil Gott, car technology specialist at IHS Global Insight. "But they're trying to get away from that because it is a difficult position to hold - and the Chinese are coming."

Indeed, China's car industry is a rapidly growing threat. This year, China is projected to displace Japan as the world's largest car producer.

For struggling US carmakers, the rise of Hyundai - and eventually other foreign carmakers - represents more potential challenge on their home turf.

Hyundai has "established a foundation here, just as the Japanese did, and they have the basic blocking and tackling down," Gott said. "Now they're moving beyond that."

- AP