At Hyundai, Branding Is Job 2

Despite receiving high marks for quality, the carmaker has struggled with stalled sales. Marketing guru Steve Wilhite has to sell drivers a new story

A tense Steve Wilhite paced in a cavernous hall at New York's Jacob Javitz Convention Center on the afternoon of Apr. 4, intently rehearsing his presentation. Hyundai Motor America's chief operating officer was about to introduce the South Korean company's upscale Genesis sedan to the media at the New York International Auto Show. He was worrying over his prepared comments about the $30,000 to $35,000 sedan, which he would soon audaciously compare with both the BMW 5 Series and the Lexus ES350.


If Wilhite seemed more pensive than enthusiastic, it was because his briefcase held a binder of consumer data spelling out just how tough it was going to be to sell the Genesis, or in fact the rest of Hyundai's higher-priced models, like the $30,000 Azera sedan and the Veracruz SUV. "We have no brand," said Wilhite, swigging from a bottle of water after 45 minutes of running his lines. "Zip."

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'MOST IMPRESSIVE'
The South Korean auto maker is desperate to convince consumers that its cars and SUVs are worth premium prices. Its impatience to see results is understandable. Hyundai's quality is actually ahead of Toyota's in J.D. Power's (MHP ) Initial Quality Study, and behind only Lexus and Porsche. Consumer Reports just tapped two of Hyundai's new vehicles as "Most Impressive" among five 2007 models it recently singled out. But only 23% of all new-car buyers last year even bothered to consider a Hyundai. That compares with 65% for Toyota Motor Co. (TM ) and more than 50% for Honda Motor Co. (HMC )

Despite an array of new models with quality and styling at levels unimaginable even as recently as five years ago--and more discounts to boot--sales growth has flattened. Hyundai's inventory of unsold vehicles has quickly swelled. The company, which was the fastest-growing carmaker in the U.S. from 2000 to 2005, had a target of selling one million vehicles in North America by 2010. Forget that. The goal has been quietly scaled back to 700,000, with a 2012 benchmark of 900,000 sales. Those targets are still ambitious: Hyundai sold just 455,000 cars in the U.S. last year. Even so, Hyundai Motor Co. CEO Dong Jin Kim recently told the media that in 2007 he expects his COO to sell 100,000 more vehicles than last year.

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THE YUGO FACTOR
The urgency of Hyundai's problem can be seen in the football-field-size parking lots behind its two-year-old, $1 billion plant in Montgomery, Ala. Sonatas are piling up as the factory turns out the sedans about twice as fast as dealers order them. Chrysler (DCX ) was harpooned by Wall Street last year for building cars and SUVs without buyers, but Hyundai's "sales bank" has gone largely unnoticed. Sonata sales fell 30% in the first quarter, and sales of the Tucson crossover and brand-new Entourage minivan have been disappointing, too. Last year, the Korean automaker's earnings fell 34%, to $1.6 billion, and its operating profit margin was halved, to 4.5% from a heady 9% three years ago.

The bottom line: Hyundai needs a new story. "When we don't have a price story, we have no story," says David L. Zuchowski, Hyundai's vice-president for sales. And the price story is under pressure. The Korean won has appreciated nearly 25% against the dollar over the past three years. "

http://www.businessweek.com/ma...ories

 

I don't buy the idea that Hyundai needs a new storyline. The real problem is with much of the public itself, not with Hyundai. People just need to open up their plugged-up ears, LISTEN a little more, and get their minds out of the past. Hyundais sell themselves once you go to the dealerships and see them. I would likely be driving one myself, except that they don't sell anything in the American market that is directly comparable to Subaru's Outback.

You can lead a horse to water, but....................

 

The problem with the public IS Hyundai's problem, they need to try & change that ...

 

I respect your opinion, but I don't quite see it that way. If people don't WANT to listen, nothing you can say will make any difference. For instance, I won't use any names, but there are a number of people, both on and off CL, who wouldn't listen to me about Hyundais and Kias. Same old line..."I'll NEVER own a Korean car...they are JUNK". And guess what?...I MYSELF thought that way.....until I saw a gradual turnaround, starting with the 1997 Tiburon and steadily improving to this very day. A number of people I know today have bought new Hyundais and Kia, not because I've told them to, but because they did what I suggested, WENT to the dealerships, LOOKED at them, DROVE them, and were convinced themselves.....after all, it is their money, not mine.....and one of the more recent Hyundai slogans was "Driving is Believing".

Now, of course, Hyundais and Kias are not for everyone....and they are not perfect cars; they still lag a little in the areas of engine efficiency, power delivery and, in some cases, road and tire noise.

 

They can, but it just takes time, & nobody can convince EVERYBODY to listen, but they sure can convince MORE & MORE if they continue to work on it consistently. Sure there are some people who never change their minds nomatter what, there are die-hards on just about anything . . .

 

Its all about marketing. I think they have the potential to beat out American auto makers easily. I mean look at some of the cars on the GM line-up or Dodge's lineup, they're hideous pieces of crap

 

I don't think it's a good idea for Hyundai to jump into the luxury car market, where branding and image is a greater consideration for buyers; the Hyundai brand holds absolutely no cache with the typical American car buyer.

Hyundai needs a halo car to change it's image. A Hyundai halo car needn't be an expensive car, but it should offer something that is out of the box for the company. If it were my decision, I'd tell them to build a sporty convertible, a la Miata, Solstice, Sky. Make it simple, lightweight, RWD, and make it relatively inexpensive. If it's a fun car and a genuine performer, there will be buyers who will buy it on its merits alone, regardless of brand. The Solstice and Sky are prime examples; I'm sure there are owners of those two vehicles who wouldn't have otherwise purchased a Pontiac or Saturn. This is how you change buyers' opinions - one model at a time.

Instead, Hyundai is trying to sway the minds of image conscious, luxury car owners who care just as much about the little emblem on the grill versus content.

 

The problem is that Hyundai is trying too hard, and no one is taking them seriously.

For example, the Azera is great. But why, oh why, compare it to the LS460?!? No one took that seriously, and no one will take the Azera seriously.

Now they're going to compare the Genesis to the 5-Series?!?

Hyundai needs to target Honda and Toyota, not BMW and Lexus...

 

This is true. Hyundai has no brand; no real reputation or even image. Only in the last 2 or so years has any consistency showed up in Hyundai's lineup, and since the 80s Hyundai had a bad reputation ... that's not just going to dissapear overnight. Hyundai is being overly ambitious, is trying too hard, and is getting impatient for no reason. Hyundai's execs for some strange reason expect miracles to happen in terms of their sales, but fact is it's not going to happen. Most Hyundai vehicles merely match Honda or Toyota vehicles.

Hyundai vehicles need to be leaps and bounds better than Toyota or Honda vehicles before the public even notices them. Right now I don't really see that. Yes, one can talk all day about how much Hyundai has improved, but Toyota and Honda are not sitting still.

 

This situation is unfortunate for Hyundai, because they've come a long way and deserve market share considering the value they offer. I think the problem is they saw the rise of Toyota and Honda in North America, and feel that high quality automobiles will help them duplicate their success.

There is one big difference in the scenarios of Honda and Toyota 15 years ago and Hyundai now. At that time, American auto-makers were the ones to beat. So a well-built car was all it took to take the throne. That no longer cuts it because the market has high quality offerings throughout, a better niche has to be made.

Hyundai is going to have a hard time finding a niche in a saturated market with their current strategy of quality. My suggestion would be to hold prices for the remainder of this generation of autos to maintain sales. The price strategy is all they have at this point. And at the same time invest in innovation. Offer the market something new, like Honda did with VTEC nearly 20 years ago, and SH-AWD more recently. If not from a mechanical engineering standpoint, then in the cabin. Or in design. Have offerings in the Sonata that outdo the Accord EX or Camry XLE.

My opinion is the Azera was a mistake in it's timing. They would have been better suited to offer a higher level of Sonata to give the model some more cachet. It's too early to look at the TL; concentrate on the meatier part of the market... Accord and Camry.

 

This is a great discussion kep it going.

To me the Azera should be pitted against the Avalon.

I think the ads with the LS are more about creating a fanciful view of value (the old Honda adage of getting a lot more than you paid for) for the car and less about seeing the Azera as a real competitor to the LS.

 

Exactly. Hyundai may builld better cars than they used to, but they really don't have any exceptional cars which will attract anyone from any particular segment.

Hyundai is being really foolish to compare themselves to BMW and Lexus. Even Lexus has a hard time comparing themselves to BMW. Hyundai should build one halo car like someone said earlier and that will get people's attention.

Perception is the key to changing people's interest in possibly considering a Hyundai. I'm sure they build great cars, but they still have the "I couldn't afford a Toyota" stigma atttached to them. That's one reason why many people steer clear of the showrooms.

Design a great looking cool car and people might want to take a peek at the rest of the lineup.

 

It's quite simple... if they do not restructure and change their name they will bankrupt in 4 years or less. They don 't even have to change the design and everyone can even be told "we changed our name" and everything will work out.

 

Well, the reason I will never own a Hundai is not because I think they are making bad cars, but because I have no respect for them. They do not lead, do not invest in R&D, do not innovate. They have no respect for other automakers, and blandy rip off other companies designs. Who knows, if they rip off exterior designs, they are probably ripping off engine technologies as well, albeit they can't even do that well, as none of their engines are industry leading or anywhere close. And even electronics, there was a post a while ago with Huindais AC control panel that was almost identical to the AC panel in Lexus GS. Hey, who knows, since they seem to have no shame in ripping off other companies designs and technologies, they are probably doing so on a pirated copy of photoshop. windows, and other software. After all 98% of software in Korea is pirated. No wonder they can sell their cars cheaper than competition.

Me personally? I have more respect for Yugo than Huindai.

 

So you're saying the problem isn't with Hundai, but with the public? The how do you explain the fact that there was no problem with the public when Toyota and Honda entered the market? They were new as well, and didn't have brand recognition, and their early products weren't that great? How do you explain the Lexus and Acura phenomenons, that without any history, during their first year outsold BMW and MB combined? Yet when it comes to Hundai there's a problem with the public? Hint, Hint... the problem is with Hundai, not the public.