With Low Prices, Hyundai Builds Market Share

y NICK BUNKLEY

Published: September 21, 2009

DETROIT — It was not exactly a planned strategy, but the recession, particularly in the United States, has been very good for Hyundai, the South Korean automaker.

Skip to next paragraph

Enlarge This Image

Seokyong Lee/Bloomberg News

Hyundai’s goal is to have the industry’s highest fuel economy by 2015; it is currently third, behind Toyota and Honda.

Enlarge This Image

Charles Rex Arbogast/Associated Press

John Krafcik, head of Hyundai Motor America, said, the brand was well placed, “particularly in a recessionlike environment.”

Enlarge This Image

Fabrizio Costantini for The New York Times

George Glassman, a Hyundai and Kia dealer in suburban Detroit, is seeing customers of various ages and income brackets.

After years of struggling to prove to consumers than it was more than a second-tier brand, Hyundai Motor America and its affiliate, Kia Motor America, accounted for 8 percent of the new-vehicle market in the United States in August, more than Chrysler’s 7.4 percent. The company sold more than 60,000 vehicles last month as buyers rushed to take advantage of the government’s cash-for-clunkers program before its end.

The carmaker’s sales topped August 2008 by 47 percent — total industry sales were up only 1 percent.

“They have a tremendous amount of momentum right now, and I don’t see that stopping,” said Erich Merkle, an analyst who founded the Web site Autoconomy.com in Grand Rapids, Mich. “Hyundai is a competitive threat not just to the Big Three but for the first time to the Japanese automakers as well.”

Globally, the Hyundai-Kia Automotive Group, which owns the Hyundai Motor Company and about 39 percent of Kia Motors, passed Honda last year and the Ford Motor Company this year. It became the fourth-largest automaker, behind Toyota, General Motors and Volkswagen (it is seventh in the United States). It was in 11th place worldwide less than a decade ago.

Hyundai and Kia both expect to sell more vehicles in the United States this year than they did in 2008, a claim that only one other automaker, Subaru, can make. Sales by all of Hyundai’s bigger competitors have fallen by more than 20 percent so far this year.

“There’s a great spot for a brand like ours, particularly in a recessionlike environment,” John Krafcik, the chief executive of Hyundai Motor America, said. “Consumers are beginning to question the value of a premium brand — is it worth an extra $5,000?”

Hyundai’s Exhibit A is the Genesis, a luxury sedan that was named North American car of the year at the Detroit auto show in January. Part of the appeal of the Genesis, in addition to a price tag that is thousands less than that of its chief rivals, may be that hardly anyone associates Hyundai with the word “luxury.”

Its lowest-priced model, the Accent, sells for just under $10,000 for the base package. The Genesis, its most expensive model, starts at $32,250 — by comparison, the Lexus ES 350 costs $34,470, and the Cadillac CTS costs $36,560.

Several dealers have said that they are selling the Genesis to business owners who, after laying off some employees, want to project an image that they, too, are cutting back.

“The current economic climate really places an emphasis on people spending their money wisely,” said George Glassman, a Hyundai and Kia dealer in suburban Detroit who sold Oldsmobiles until G.M. eliminated that brand in 2004.

“They’re appealing to people’s desires to spend reasonably and to get great value for your dollar,” Mr. Glassman said. “Twenty years ago, Hyundai was a reasonable alternative to purchasing a used car. Now they are attracting consumers from all ages and all walks of life.”

Mr. Glassman’s recent customers include Joe Randazzo, who had considered the Chevrolet Malibu sedan because his son works for G.M. Despite the family connection and his past preference for Cadillacs, Mr. Randazzo chose to buy a Hyundai Sonata.

“It’s a very good ride, and I really enjoy driving it,” said Mr. Randazzo, 79, who is retired from running a ceramic tile business. “I used to drive Cadillacs all the time. I don’t need to drive a heavy car like that anymore. No disrespect to G.M. or anybody, but my next car will be a Hyundai, too.”

Hyundai’s research indicates that 30 percent of consumers now consider the brand when shopping for a new vehicle, nearly triple the number who did about five years ago.

“They went from the perception of cheap to an excellent value,” said Mr. Merkle, the analyst. “I think that this will stick even after we come out of this environment, because people are becoming better acquainted with the product.”

Aggressive marketing is another reason Hyundai’s sales are surging. The automaker introduced a first-of-its-kind offer early this year that lets customers who find themselves without work return their car with no penalty for up to a year. It later expanded the offer to include up to three months of payment relief.

G.M. and Ford briefly offered similar programs after the Hyundai program helped increase sales.

Hyundai also jumped ahead of competitors this summer, by inviting customers to turn in old, inefficient vehicles under the cash-for-clunkers program three weeks before its official start.

“They’re really trying to use this recession as an opportunity to take market share, which they have,” Jessica Caldwell, director of industry analysis at Edmunds.com.

Hyundai and Kia are pushing for more. In November, Kia plans to open a new assembly plant in West Point, Ga., its first in the United States. (Hyundai has a plant in Alabama.)

Several new models are coming soon, including the compact Kia Forte this fall and revamped versions of the Hyundai Sonata and Tucson next year.

The company’s goal is to have the industry’s highest fuel economy by 2015; it is currently third, behind Toyota and Honda, even with no hybrid in its lineup.

“We may do that a couple of years earlier if you look at the trajectory we’re in,” said Mr. Krafcik.