In the worst US car market in 28 years, Hyundai Motor Co is on a roll.
The Seoul-based automaker has boosted sales in the US, where demand for Toyota Motor Corp’s models has plunged. The Genesis, Hyundai’s first luxury car for the US market, won top honors at the Detroit car show in January and in three months the company will bring out its first hybrid in Korea. The stock has surged 34 percent this year.
Hyundai Chairman Chung Mong Koo’s decade-long push to evolve from a maker of cheap cars has been aided by the won’s 13 per cent plunge against the dollar over the last six months versus the yen’s 10 per cent gain. Higher sales coupled with a favorable currency have kept Asia’s fourth-largest carmaker profitable as Toyota suffers its first loss in 59 years.
“This is a once-in-a-lifetime chance for Hyundai to catch up with Toyota,” said Chang In Whan, president of KTB Asset Management Co. in Seoul, with about $7.1 billion in assets including Hyundai shares. “Hyundai should make the most of this crisis to create its own opportunities over the next one to two years.”
The worst financial crisis since the Great Depression has hammered car demand, with sales falling 39 per cent so far this year in the US In contrast, Hyundai’s US sales have gained 4.9 per cent.
That’s helped cushion the carmaker’s 20 per cent plunge in South Korea, where the government plans to cut taxes to spur demand.
Hyundai slipped 3.8 per cent to 53,000 won in Seoul trading on Monday. Toyota dropped 3.7 per cent to 3,140 yen in Tokyo.
Hyundai gets 55 per cent of sales from emerging markets including China, India, where auto demand has withstood the global slowdown. Toyota gets 31 per cent of sales from emerging markets. Hyundai’s sales in China jumped 38 per cent in the first two months of the year.
Hyundai is also the second-largest carmaker in India, where its sales gained 13 per cent this year.
Santro minicars and Accent subcompacts made in India were exported to more than 100 countries. A reliance on such small cars gave the company an edge in emerging markets, said Lee Hyun Soon, Hyundai’s vice chairman.
“Our product mix was better than any of our competitors,” said Lee, development chief for Hyundai and affiliate Kia Motors Corp., in an interview on March 23. “More than half of our production is small vehicles, which has been a big help.”
Small Cars
Small cars account for 64 percent of Hyundai and Kia’s global production, the second-highest proportion among automakers after Volkswagen AG, according to Chung Sung Yop, a Seoul-based analyst at Daiwa Securities Group Inc.
Hyundai generally undercuts Toyota on price and U.S. sales of the $26,000 Sonata and $30,000 Santa Fe sport utility vehicle have risen while consumers avoid $28,000 Camrys and $39,000 4Runner SUVs.
Still, Hyundai has a long way to go to catch Toyota, which overtook General Motors Corp. as the world’s largest carmaker last year. In 2008 Japan’s biggest automaker sold 8.97 million vehicles, down 4 percent. Hyundai and Kia’s group sales rose 7.3 percent to 4.2 million, based on Bloomberg calculations.
Chasing Toyota
Even with Toyota’s 36 percent plunge in U.S. sales this year, the 226,870 vehicles it sold in the market dwarfs Hyundai’s sales of 55,133 cars and trucks.
Hyundai also lags behind in quality. Toyota ranks fourth in quality in a 2009 survey by J.D. Power & Associates. Hyundai was in 14th place.
“Its brand perception is still lagging,” said Choi In Ho, who oversees 2.35 trillion won at UBS Hana Asset Management Co. in Seoul, including Hyundai shares.
Hyundai’s U.S. unit has spurred sales with an offer to buy back vehicles from customers who lose their job and can’t make payments. Unemployment in the U.S. in February rose to 8.1 percent, the highest in a quarter century.
“The number of people who would definitely consider buying a Hyundai model has more than doubled,” said Alexander Edwards, head of auto research for San Diego-based Strategic Vision Inc., which estimates 9 percent of consumers surveyed would “definitely” consider a Hyundai, up from 4 percent in 2002. That compares with 40 percent for Toyota and 38 percent for Honda.
New Engines
Hyundai is revamping the Sonata sedan to compete with Toyota’s Camry and Honda’s Accord. It will add new 4-cylinder and turbo-charged engines that it says will match Honda and Toyota engines in output and exceed them in fuel savings.
The company will begin selling a hybrid-electric version of the Sonata in the later part of next year that Hyundai’s Lee expects to cost less than Toyota’s Camry Hybrid and offer better fuel-economy. Hyundai will start selling a hybrid car that uses liquefied petroleum gas in Korea in June.
At the New York Auto Show in April, Hyundai will display its new Equus luxury sedan with a domestic base price of 63.7 million won ($48,000). The car, comparable to Toyota’s Lexus LS and Daimler AG’s Mercedes-Benz S-class, may eventually be sold in the U.S., Lee said.
Hyundai is forecast to post a 1.4 trillion won profit this calendar year, according to analyst estimates compiled by Bloomberg. Toyota will have a loss of 224 billion yen in the year ending March 2010, according to analyst estimates.
Still, as both carmakers are dependent on exports and currency fluctuations, Hyundai’s advantage may not last, said UBS Hana’s Choi.
“The won can turn its direction at any time,” said Choi. “Japanese carmakers could return as even stronger rivals.”
