Through the first seven months of 2011, Hyundai and Kia have sold more vehicles to Americans than all European automakers combined, and are growing faster than any other automaker. Here's how South Korea's automakers have the rest of the world on the run.
It's not a great time to sell new cars and trucks in the United States, what with people not having cash or jobs or homes that are worth as much as they thought when they bought them with money they didn't have. Yet Hyundai has managed to see its car sales grow this year by an astonishing 23%, and Kia, its semi-autonomous car-partner budget brand, has increased sales by an even more staggering 28%. For each automaker, that's a record in sales growth. It makes sense. Each has a lineup of cars and SUVs with few weaknesses; the Hyundai Sonata and Elantra were the 9th and 10th-best selling cars in the country in July, while the Kia Sorrento cracked the top 10 for trucks.
Behind the success of the Korean automakers lies a combination of skill, luck and ass-kicking from a single man who's now among the world's most powerful executives. Here's a few reasons for their good fortune:
▪ Both have for the first time found a visual style that appeals to Americans. Hyundai's curved grille and waved body creases look handsome on the Sonata and work well enough on the new Elantra and Tucson that models which have yet to get the design language seem a bit stale. It may not wear well, but it's captured the moment.
Kia used to build sedans that looked like they'd been scavenged from Jaguar's recycling bin; now the Optima is arguably the best-looking midsize sedan, and far better than the wall of beige coming from former champions such as Honda. Even the 2012 Toyota Camrylooks so derivative the Kia and Hyundai sedans will still take its lunch money and ask why it keeps hitting itself.
▪ Despite some lingering quality problems, Hyundai and Kia have managed to surpass the test of basic standards of safety and dependability that once kept them in the same last-ditch bracket as Mitsubishi and Daewoo. They were also early adopters of the idea that the inside of a small car should look more luxurious than the plastic bins at airport security. The Elantra's handling might not be as crisp as the Ford Focus or Honda Civic, but it has the best interior in the class, putting the new Civic to shame. And for the rare stories of a problematic defect, Hyundai's been quick to pounce atop it and deal with the issues as quickly as any other automaker.
▪ Hyundai's savvy marketing and high-concept incentives — like buying back your car if you lose your job — drew in shoppers without costing a fortune. Kia's marketing has been more annoying (why couldn't the Aztecs kill those rapping hamsters?) but it's performed the same service of making Kia noticed.
▪ The Sonata can be bought with either a zippy turbo version or gas-electric hybrid. Nearly two-fifths of the vehicles Hyundai sold in July had highway fuel economy ratings of 40 mpg, grabbing much of the mantle of efficient sportiness that Honda threw away when it built the Insight. Meanwhile, there are rumors Hyundai will throw a V8 into the Genesis coupe, building a real challenge to the traditional Detroit muscle car.
▪ Each now has a factory in the United States, and through the magic of building in the most union-resistant reaches of Dixie, pay the lowest factory wages of any automaker in the United States, giving them a cost advantage over Detroit, the Japanese and Volkswagen.
▪ Japan's earthquake knocked its automakers dizzy, but the Japanese have also been struck by currency changes that have whittled away profits on vehicles sold in U.S. dollars. South Korea's currency hasn't had such issues. And unlike Japan, whose automakers face a populace more obsessed with gadgets than cars, South Korea considers automaking a national priority, even though its roads are rarely less than bumper-to-bumper.
I keep calling Hyundai and Kia two companies, but in fact they're arms of the same Korean conglomerate, or chaebol. Even though vehicles such as the Optima and Sonata are mechanical twins, and the Kia plant in Georgia also builds Hyundais, the U.S. marketing branches are told to see the other as just another competitor. And where those branches meet in Korea, the man who can take credit for growing the entire tree is chairman Mong-Koo Chung.
Chung is the scion of South Korea's version of the Ford family, the country's richest man with a fortune of more than $2 billion, and has overseen Hyundai's transformation from regional steel-stamper to world-class player. His family's ambitions nearly cratered Hyundai in the late 1980s, when it flooded the United States with embarrassing crap cans. Kia, independent at the time, was little more than a contract builder; its oval logo is the same dimension as the Ford blue oval so that it could play "two for you, one for me" when building Ford Aspires.
In retreat, Chung refocused the company on quality, technology and styling; hiring engineers from around the world, bringing in former Audi designer Peter Schreyer to remake Kia, which Chung bought out of bankruptcy, and winning an intra-family battle for control of the Hyundai chaebol that now lets Hyundai buy much of its steel and parts from its own affiliates.
When other automakers face off against Hyundai/Kia, they're not just struggling with Chung; they're fighting the entire government of South Korea, which considers Hyundai's success a matter of national honor. When Chung was convicted in 2007 of embezzling $110 million from the company for illegal political donations, his three-year prison sentence was eventually suspended before the government pardoned him entirely, saying he was needed "to continue to contribute to the development of Hyundai Motor Group." Contrast with the way the United States public treated saving General Motors and Chrysler from bankruptcy and you'll see why I think we should be getting ready to drop to a knee in front of our new Korean automaking-masters.
No industry is quite as volatile as building cars, and for as many strengths as Hyundai has, it's far from perfect. Chung's push for luxury cars has U.S. Hyundai dealers trying to sell $50,000 Equus sedans, an experiment still too early to judge. Korea's labor unions make the UAW look like a quilting circle, regularly striking and locking down plants. Akio Toyoda, another auto-industry scion, has his own comeback plans for Toyota that's aimed right at Hyundai.
It's a long drive for a company that built its first original vehicle in 1976 to invade and conquer the automotive world in four decades without the aid of alien technology. Hyundai isn't unstoppable, but in boardrooms from Detroit to Frankfurt to Shanghai, it just looks that way right now.
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