TRDFantasy

I did not mean the past when Hyundai's quality was low. Specifically I am talking about Hyundai in the past 2 years. Their prices offered a lot of value, but recently over the past few months priced have begun to creep up. The refreshed 2009 Sonata has a higher base price than the 2008 model. The Entourage is priced almost equally to a Sienna. The Santa Fe is priced right in line with the Rav 4, CR-V, and other competitors. Keeping this in mind, Hyundai has been forced in the past 1 or 2 years to raise incentives to move the metal.

What I'm trying to say is that it makes no sense for Hyundai to be raising prices, only for sales to struggle and for them to offer big incentives. The prices should be lower in the first place.

I think that one reason why sales might be struggling is the perception people get when they see that Hyundai's prices are in-line with the competition. I might be wrong, but it's possible that consumers in the US don't see Hyundai as offering great value anymore.

Hyundai in some ways is stretching itself too thin. Most people associate Hyundai with great value, but that association erodes and vanishes when they see Hyundai prices being in-line with the competition. Then when consumers see big incentives that does not help their perception of the brand either. At the same time, Hyundai has admitted they want to compete with some near-luxury and luxury nameplates. They want to do this without making a new brand.

If consumers associate Hyundai with value, yet top management wants to move Hyundai upmarket, that creates a conflict. Instead of catering to the market with great value, top management wants to force consumers to accept Hyundai as an upmarket brand. I'm not so sure such a "forceful" approach will work.

carguy101

I can't speak for China. However, please provide some articles how Korea is guilty of any of the above. If it is so "well known", there must be at least a few articles about it, right? And please, the spats with unions, EVERY company in every country has those.

Sometimes the ignorance amuses me...

carguy101

I don't buy this theory that the "management style" has led to the 2 year sales stagnation at Hyundai. The same "management style" resulted in the fastest growth of any auto company in the previous 8 years before that.

IMO, these are the reasons for the 2 year stagnation:

1) Part of the business cycle. It's natural for companies to hit a lull after years of double digit growth. Sales will plateau, unless "something" takes it to the next level. Toyota has faced similar plateaus in the past.Whether Hyundai will discover that "something" remains to be seen.

2) Prices have gone up because of rising labor costs and a rising won. The value proposition is still there, but not as much as before.

3) I put this third, but I think this is perhaps the biggest reason. Hyundai never really took many sales away from Toyota and Honda. Their sales increase came mainly at the expense of the domestics, Nissan, Mazda and Mitsubishi, because these companies were putting out some crappy products. But, now the products and quality from these companies have vastly improved. So conquest sales are much harder now.

carguy101

"At the moment, the stretch goal that is stressing out American executives at Hyundai Motor is the company's insistence on trying to move into the low end of the luxury business. For years, executives in the U.S. have been telling their counterparts in Seoul that the two brands are not strong enough to sell for much above the price range of $12,000 to $25,000. But their warnings have been ignored."

You know, I totally think that the execs in Korea are in the right about this one. Apparently, the American execs just want them to sell vehicles at $25,000 or less, because the brands aren't strong enough? Well you know what? If they continue to only sell sub-$25k vehicles, their products will always be associated with cheap and "economy", and the brand will have a hard time getting strong. It's a Catch-22.

It is a big risk, and I'm not saying that they will necessarily succeed. They may as well fail. But at least they're taking a shot and I think they should take that shot. Ideally, they should have launched the Genesis under a different brand, but I think the cost of building another dealer network and brand name is too hard to swallow even for those "aggressive" Korean execs.

TJW98LS

iTrader: (1)

Mmm could be that im still stuck in the 90s

I dont honestly think Hyundai is a threat to the best automakers in the world. What kills me is the name of the car is tacky as hell. Think about it...

Class says "Lexus", "Mercedes", or "Bentley". When driving an eligant vehicle people want the classy looks yes, but they also want a name that sounds rich , powerful, and superb. I couldn't possibly imagine anyone thinking "HUNDAY!" or "HUN-DIE!" as a class-oriented vehicle.

Something about that girlie little H on the vehicle just doesnt stand for any type of legacy or class.

Och

iTrader: (3)

Their name is their other problem, - most people don't even know how to pronounce it proprely, and very few people know how to spell it, and until they get people to recognize the name, they wont have much respect.

CK6Speed

iTrader: (1)

Not speaking of you, but other people that buy a car based on the name or the way it sounds are simply idiots. Who buys crap just because it sounds good? I for one rather have a good car with a crappy name than a crappy car with a classy name. I'm not saying the Genesis is really a good car since most of us still haven't actually been in one yet, but Genesis itself sounds like a classy name to me anyway.

I ask everyone this. Why don't people buy cars based on the car itself and its own merits vs the name brand its associated with? Doesn't anyone just buy a car because it is a good car? Are people that shallow that they need the prestigious name to show off to everyone?

I'm not sure if I will be buying a Hyundai myself anytime soon, but if the do actually make a good car, I'll probably buy one since I really don't like anything that Honda and Toyota are making right now.

CK6Speed

iTrader: (1)

Prices has gone up for everyone. Its already been a few years now where a loaded Honda Accord can top $30K. Who the heck will but a $30K Honda? Obviously a lot of people. A loaded Toyota Camry isn't exactly cheap either. Neither the current Honda Accord nor Toyota Camry are anything special right now either.

The reason why Hyundai can make some headway is because the big Asian brands like Honda and Toyota aren't exactly putting out winners lately.

bitkahuna

iTrader: (20)

Well one thing S.Korea does do that is wrong is the absurd protectionism of their own market. According to this they mandate that 40% of all movie showings are Korean made too. But last year a U.S. / S. Korea free trade agreement was signed (http://www.ustr.gov/Document_Library...Agreement.html) so hopefully that is improving (or will improve) things.

TJW98LS

iTrader: (1)

I can see it your way CK6. But why have something you cant pronounce or laugh at everytime you say it, when you can have something of better value. Mercedes and BMW granted are not the most reliable vehicle in the field, id actually contrast it to Lexus and toyota.

As someone mentioned earlier that Hyundai would not be a threat to Lexus, but to Toyota...I agree with that statement, but there would be absolutally no way Hyundai would start to dominate Lexus. Think about the owners of NEW Lexus vehicles. They dont buy the car because of all the options and gadgets (like I would) they are more into status symbols. AND I know this is a curveball, but a very good example would be the Cadillac Escalade...EVERYONE has to have one because their favorite music artists drive one.

You normally dont see Hyundais in music videos, or hear any music artist rapping about ridin' high in their Hyundai Sonata.

TJW98LS

iTrader: (1)

Speaking of Korea...isnt one of Hyundais plants located somewhere near a nuclear test site? Fact or Fiction?

Och

iTrader: (3)

Well, you're right and wrong about names. While this is true that there could be the best thing ever behind a crappy name, and the worst pos behind a fancy name, but names are important, not just in car industry. Look at fashion designers - can you imagine John Smith Jeans competing with Tommy Hilfiger or Christian Dior? These fancy names are usually not real - they are made up to trigger a certain perception. Look at artists and other celebrities, they often create glamorous names for themselves. And for Hyundai's sake, nobody knows how to pronounce or spell their name, and therefore it will never get any serious recognition. And this is true not just for the US, but for many other countries - for instance Huyndai it is ridiculous how Hyndai is spelled and pronounced in my language. For instance Toyota modified their name from Japanese Toyoda so it would sound better in the rest of the world. And they probably spent more money to come up with the Lexus name than some makers spend on R&D of their cars.

Now, that being said, of course it is retarded to buy something based on the name. Of course it is the product that matters the most, and I personally first and foremost look at the product, and if its a car like Supra, S2000, Viper - I couldn't care less whether it has a prestigious badge or not. However I also look at the brand that makes that product. For instance I love Audi A5/6/8 but I would have a hard time trying to pressure myself to buy one because german automakers past association with *****. And as far as Huyndai, I wouldn't want one because their name associates with twenty years of crapboxes with tires and pathetic copycats.

CK6Speed

iTrader: (1)

I don't disagree that Hyundai is not a serious threat to dethrone Lexus or be a major competitor to them, or the other major luxury brands over all at this time. At the moment only 1 Hyundai with the Genesis has the POTENTIAL to be a major competitor to parts of the luxury car market. I don't think anyone here, even the pro Genesis members are saying the Genesis will compete against the LS460, Mercedes E and S Class, BMW 7 Series and such. However, it will treaten a lot of the entry level luxury cars like the G35, Lexus IS/ES, Acura TSX/TL, Audi A4 and such.


I also realize the a lot of people do buy cars simply because of the status it offers. If that is the only reason they are buying those specific cars I still call them idiots. Heck, a lot of people asked me why I bought an NSX over say a Ferrari 328 at the same price. They tell me its a Ferrari and all the chicks would be all over you right? Well, IMHO the Ferrari 328 sucks compared to the NSX so why would I want to buy an inferior car? If I had 20 million dollars I wouldn't buy as Bentley because I'm just not into them.

This has gone a little off topic, but if what Hyundai is doing is working, then what's the problem? The only time Hyundai's management style becomes a problem is when it stops working and they refuse to change. I really doubt any major company no matter if they are Korean, Japanese, Chinese ect.. will simply let their entire business fail because they are too stubborn to change their management style. If Hyundai starts to have a problem because of their management style, I'm sure they will make adjustments to keep their business alive. If they don't they deserve to fail like any other business.

CK6Speed

iTrader: (1)

Unfortunately you loose me when it comes to fashion. Remember, I'm from Hawaii were T-Shirts, shorts and slippers are the norm. Fortunately I work in a place were I don't have to dress up. I literally go to work in a T-Shirt, shorts and slippers on the weekends. During the weekdays I do put on long pants and shoes though. So trying to use fashion and style as an example with me are not the best way to go I'm one of those that really could give a rats behind about trends, current styles, dressing up (Unless I have to). I believe the individual makes the man, and not the name brands he wears. Same with cars. I believe the car itself should be judge, and not the brand. That is why I like cars like the Corette and would buy one, but wouldn't touch most other American cars.

TRDFantasy

Just like the "same management style" at GM long ago had GM making huge profits and commanding the market. Now look where this management style has gotten them?

You can argue that Hyundai's retail sales growth in the US has slowed to a halt. If it wasn't for the huge fleet dump of Sonatas this past December, then Hyundai sales would have been down for 2007 compared to 2006. Sales this year are down quite a bit too.

It's easy to experience huge growth when your sales are very low to begin with.

For now, sales seem to be struggling but if sales continue to drop Hyundai could actually see sales down for 2008. That would mean more than a sales "lull", it would mean a reversal of the growth they've seen over the past few years. A sales lull would mean your sales have slowed but at least are still growing. Right now it looks like it could be more than a lull for Hyundai.

It's also strange for Hyundai to be experiencing a sales lull in the US, seeing as their sales volumes are low.

With regards to your last point, I agree with you. Most of Hyundai's conquest sales have come from the domestic brands and some of the smaller Japanese brands, not really Honda, or Toyota. So the question you have to ask is, why? Why isn't Hyundai conquesting sales from Toyota or Honda?

If they continue to be *so* successful like many are claiming, then their conquest rates of Toyota and Honda should be going up, and their sales should be continuing to go up, but they're not.

There is nothing wrong with the idea of moving the Hyundai brand up-market, but it must be done in a progressive, "organic" way so that Hyundai's brand perception and reputation can change to fit the upmarket ambitions of the company. There is nothing wrong with the idea, but the way Korean management wants to implement it is IMHO not the right way to do it.

One can argue that it was a big risk for Toyota to establish the Lexus brand in the 1980s. They spent billions to establish the brand and dealer network. Keep in mind, we're talking about billions 20 years ago. Today it would likely be in the tens of billions. But at the same, Toyota took a "calculated" risk with the Lexus brand.

Korean execs wanting to stretch the Hyundai brand to encompass everything from econobox Accents to luxury vehicles like the Genesis IMHO are not taking a "calculated" risk.

If you ask a person what does Hyundai stand for, assuming they know the brand most people will tell you value. If Korean execs forcefully stretch the brand to encompass upmarket luxury vehicles, then what will the brand stand for then? It certainly won't be value anymore.

This doesn't seem like a "calculated" risk simply because this can easily mix up the fragile brand indentity that Hyundai has right now. Hyundai risks losing not just a lot of money, but also damaging the Hyundai brand itself.

With Lexus, it was "calculated" because even if Lexus had failed, then the Toyota brand would not really be affected that much. Yes Toyota would have taken a huge financial hit but the core Toyota brand reputation would remain intact.

Yes, a lot of people will buy a Honda for 30K because Honda has a very strong brand image and reputation. The Honda brand is simply in another league compared to Hyundai in terms of perception and reputation. It's a flawed comparison you're making here. Same thing with Toyota. Toyota is THE strongest brand right now, not just in North America, but in many parts of the world.

A loaded Sonata right now carries an MSRP of roughly 25K. That looks cheap compared to a loaded Accord or Camry, but the Sonata isn't nearly as "loaded" as the Accord or Camry. Navigation is not available on the Sonata, and neither are features like push button start. A comparably loaded Accord or Camry will end up quite close in terms of MSRP to the Sonata. That is why Hyundai is forced to offer heavy incentives on the Sonata.

The revised 2009 Sonata will offer some new features like Nav, but it's price will also go up. A loaded 2009 Sonata is likely to have an MSRP of 26-28K. Then of course there is the fact that the Sonata does not have a hybrid variant, and likely won't have a hybrid variant for several years.

A lot of people are also willing to pay more for Toyota and Honda because of the strong reputation both brands have.

You may not feel that Honda and Toyota are putting out winners, but the sales results speak for themselves. Consumers speak with their wallets, and although Accord sales seem to have hit a bit of a rough patch, Camry sales have never been stronger.

I agree that *on paper* the Genesis threatens a lot of cars, but in reality it remains to be seen what and how much the Genesis will threaten. You must keep in mind the differences in dealer service for example.