Hyundai counts on luxury, hybrid hopes

Even as its U.S. sales have declined this year, Hyundai Motor Co. has coped with the market downturn better than many of its competitors, thanks to its lineup of small, fuel-efficient vehicles.

Automotive News
5 min read

Automotive News

Even as its U.S. sales have declined this year, Hyundai Motors has coped with the market downturn better than many of its competitors, thanks to its lineup of small, fuel-efficient vehicles.

Amid the industry turmoil, Hyundai seeks to move upscale with the launch of its near-luxury Hyundai Genesis. It also is pursuing an ambitious hybrid strategy and working to differentiate the Hyundai and Kia brands.

Brandon Yea, 50, senior vice president of Hyundai-Kia marketing, and Jang Seok-san, 54, senior vice president of Hyundai export coordination, discussed the company's business outlook with Asia Editor Hans Greimel at Hyundai headquarters in Seoul.

What are your sales targets for the Genesis?

Jang: Our objective is 55,000 cars worldwide (in the first full year of sales). We are looking for 20,000 in America for the full year. The big markets will be Korea, the United States, China and the Middle East.

The Genesis coupe is separate. We assigned 40,000 for next year. About 28,000 will be in the United States.

Are you satisfied with the Genesis launch?

Yea: The early response from journalists who have driven the car, and also from dealers who have received the cars, is quite good. Let's wait and see how the customers respond. But most of the articles in the newspapers look very positive.

What is the leasing strategy for the Genesis?

Jang: Our leasing penetration is, generally speaking, very low compared with the industry average. However, we have the potential to increase this. In the case of the Genesis and Veracruz, we have good residual values.

Even if we increase the lease ratio, our total number is not a big number because our penetration is low at the moment, especially for high-end product.

Yea: The most important thing is the current residual value forecast by Automotive Lease Guide. They say a 3-year-old Genesis residual value may be 50 percent, which is the highest ratio among Hyundai products and almost equivalent to other premium-brand residual values. That's the key to the Genesis lease market.

Hyundai releases its first hybrid next year, an Elantra, in Korea. The following year, its first hybrid hits the United States, a Sonata. What are your hybrid plans?

Jang: We are going to increase production of hybrids year by year. By 2018, our company is planning to produce half a million (hybrids worldwide). We'll start with the Elantra and Sonata, and the products will be added one by one.

Toyota has found a niche with the Prius, a dedicated hybrid. Honda comes out with its dedicated hybrid next year. Will Hyundai someday offer stand-alone hybrids?

Yea: It is very clever for Toyota and Honda to produce stand-alone hybrid cars, because hybrids enjoy a good environmental image. If they have uniquely styled hybrid cars, it will have a big impact on customer perception. But it costs a lot. So in the short term, we will see hybrids with existing vehicles.

Next time, probably we need a stand-alone. But if hybrids become more common and popular, where we see them often on the street, I have to ask whether we still need the stand-alone just in terms of marketing.

How do the typical Hyundai and Kia customers differ?

Yea: Kia is targeting customers who are looking for fun, for a more dynamic product. For Hyundai, they are looking for something a little more mature and more conservative than Kia, but modern.

In terms of styling, "sleek" is the key word for Hyundai. For Kia, "dynamic" is the key word.

How will that play out in design and content?

Yea: Have you seen the Soul? Hyundai will not have a car like it. Kia has a very aggressive look. The Soul will be the first car that shows Hyundai and Kia's new differentiation strategy in a real product. This is a clear sign.

What is a Hyundai model that wouldn't fit in the Kia lineup?

Yea: The Genesis. But even Hyundai's small cars will have a more luxurious feeling, with more content, some differentiation in the technology. Kia will focus on entertainment equipment more than Hyundai. Hyundai will focus more on performance or safety equipment.

This is a global approach, with "globalization." We will adopt that strategy to each specific market and change it a little. But basically, there should be consistency through all our markets.

Will Hyundai "globalize" the i10 small car for the United States?

Yea: The i10 is too small for the American market. Of course, we are measuring customers' tastes, which are constantly changing. But at this moment, it is too small.

What small-car models are you missing in the United States that you need?

Yea: Something similar to the Honda Fit, even the Toyota Yaris. The five-door hatchback hasn't been a popular model in the United States historically, but now it is getting more popular.

So some hatchback models that we are now selling in Europe might be good products for the U.S. market. A little bit bigger than the i10. You know, the i30 or a little smaller--the i20 for the European market. But there is no decision yet.

Will Kia get turbocharging technology?

Yea: Definitely.

Will you use it more as a performance enhancer or as an enabler for downsized engines?

Yea: More out of environmental concerns. Especially in Europe, every manufacturer's engine size is down and displacement is down. But they still need more power.

So what can be the solution? Probably gasoline direct injection or turbocharging technologies. It is a big trend in Europe now, maybe later in the United States.

This year has been tough for all automakers. Your sales are down slightly. Can you pull the full-year results into positive territory?

Jang: It looks very bad at the moment. We hope there will be no decrease. We are doing better than average, but we still don't like negative numbers.

We are suffering from a production capacity shortage. When we have the new plant in the Czech Republic come online in November, it will help to supply more cars.

Hyundai has announced plans for a new plant in Brazil, its first in Latin America. That region is the last frontier for Hyundai. Where are you headed there?

Jang: Latin America is coming on very strong. This year, our sales will be 35 percent higher than last year. We expect that trend to continue. We will end up with more than 200,000 cars this year--maybe 210,000 or 220,000.

(Via: Automotive News)