Sonata gets a D

Why Hyundai's premium offering got a lukewarm response from the market

When it launched the Santro and later, the Accent, it looked as if Hyundai Motor India possessed the Midas touch. Both cars redefined success in the Indian car market, with combined sales of over five lakh cars since 1997.

But with its third offering "" the Sonata ""Hyundai seems to have hit a speedbreaker. Sales are falling and now there's a risk of cannibalisation from Hyundai's newest car, the Elantra.

It wasn't meant to be like this. The launch of the Sonata in July 2001 flagged off the D-segment in India (cars in that segment are between 4,701 and 5,000 mm-long and priced at Rs 10 lakh to Rs 15 lakh). Until then, there was no bridge between the Rs 5 to 6 lakh C segment and the E-class Mercedes-Benz (Rs 23 lakh).

Other car manufacturers followed quickly: the Honda Accord and Ford Mondeo were launched within months of the Sonata, while the Toyota Camry came to India in end-2002.

Car dealers point out that the early months were good for the Sonata. But soon, as the Accord picked up pace, the Sonata started feeling the heat.

The Sonata's marketshare, too, has dropped: from a 50 per cent share of the premium segment in 2002, it slipped to 36 per cent in 2003 and rests at 23 per cent at present.

The Accord, meanwhile, has grown from 32 per cent in 2002 to 40 per cent now, followed by the Toyota Camry (21 per cent), which is up from 11 per cent last year (according to the Society of Indian Automobile Manufacturers).

So, where did the Sonata go wrong? Hyundai did not reply to a questionnaire sent by The Strategist. But market observers point out various roadblocks on the Sonata's drive to success.

When it was launched, the Sonata carried a price tag of Rs 13.5 lakh""that was the most attractive price in the premium category. Coming in a few months later, Ford, in contrast, launched the Mondeo at Rs 18.5 lakh, while Honda brought in the Accord at Rs 17 lakh to Rs 18 lakh.

"The Sonata was brilliantly positioned at its launch""it filled that existing gap perfectly," agrees an automotive consultant. It was also an impressive looking car, complete with plush interiors and even a hood ornament. Initial ad campaigns for the car played up its looks and "regal" bearing, juxtaposing it with royal palaces.

But, from all accounts, the Sonata was all style, no substance. The car took a beating when it came to technology. The newer entrants in the D-segment were quickly found to be more advanced, and in some cases, more powerful. The biggest problem, say automotive consultants, lay with the engine.

Of Korean origin, the four-cylinder engine was of early 1990's vintage and paled in comparison with its Japanese competitors. An older engine means lethargic performance and higher fuel consumption""the Sonata was found guilty on both counts.

To its credit, Hyundai did try to address the problem. It pre-empted V6 models from Toyota and Honda by launching the Sonata with an efficient 2.7 litre, V6 engine in end-2002 (a V6 is a six-cylinder engine with the engines arranged in a "V"; it is more powerful than the four-cylinder version).

Unfortunately, given how sensitive Indian buyers are to fuel efficiency, the V6 proved to be a bigger gas guzzler than its four-cylinder predecessor.

According to published road test reports, four-cylinder models of the Accord and Camry returned 10 to 11 km per litre (kpl) of petrol. In contrast, the four-cylinder Sonata offered 8 to 10 kpl, while the V6 proved thirstier at six to nine kpl.

Meanwhile, the other premium (D and C+) segment players were getting more aggressive. In 2003, Honda launched a new version of the Accord, and created a new price band of roughly Rs 15 lakh. Skoda's Octavia (launched end-2001) "" a smaller, 4,501 to 4,700 mm, yet well-built car "" was selling at about Rs 11 lakh, and Toyota launched Corolla in a similar price bracket.

Honda had understood the working of the Indian market well. The old Accord had been a five-year-old model internationally, and it didn't find too many takers in India at the price. The newer model with a more realistic price tag, clicked. The learning was clear: D-segment buyers want to ride in the same cars as their counterparts across the world.

Besides, internationally, Honda and Toyota are not aspirational brand images, which means charging astronomical prices won't work. Hyundai, too, woke up to that. In end-2002, early 2003, it shaved off close to Rs 1 lakh from the Sonata's price.

At present, the Sonata's prices range from Rs 12.3 lakh for the base model (S-20) to Rs 16.5 lakh for its top-end model 2.7L V6. "Few car manufacturers offer such a huge price range, that too at the premium end where pricing is critical," points out an auto industry analyst.

The company's done its best to keep the excitement around the car alive. It expanded privileges under "Imperial Exclusive," a customer reward programme for Sonata owners. Besides offering preferential services at Hyundai dealerships, customers are also entitled to special deals with hotels, restaurants and so on.

The latest promotion is free insurance for new cars. That's not a scheme exclusive to Sonata, though; other premium car manufacturers such as Toyota and Skoda also offer such freebies to new customers.

That's a telling commentary on the nature of D-segment car buyers. "D-segment customers switch cars fast," points out the analyst. Which also makes them sensitive to price, and open to schemes and discounts. Keeping this in mind, last year Hyundai launched a car buyback service. Customers could now trade in their old Sonata and pick up a new one for as little as Rs 7 lakh.

Trouble was, with sleeker, less ostentatious cars around, the Sonata now looked like a car that was trying too hard to make a statement. Points out the analyst, "The same looks that were considered a big plus in the Sonata's initial days, were conveniently forgotten by the customers. When competition started offering technologically more efficient and powerful cars, customers turned their backs on the Sonata's "royal" looks."

Adds an executive from Ambience Publicis, Sonata's erstwhile advertising agency, "The Sonata has purely been about looks and looks alone. No one associates technology with Sonata. It's a car meant to be driven in, not a car you drive."

The "driver's car" message came through in Sonata's communication with customers as well. The comfortable rear seat was highlighted in the ads: "Life from the back seat of the Sonata". Honda's advertising for Accord, on the other hand, showcases style and substance.

Now, Hyundai is likely to follow similar tactics with its latest launch, the Elantra. At Rs 10.49 lakh, the Elantra comes with a powerful diesel engine and is already winning rave reviews for its performance.

Like the Corolla and Octavia, the Elantra will be in the C+ segment, but if it succeeds, the tremors are likely to be felt a grade higher, and closer home than Hyundai may like.