Tuesday, 26 December 2017

How Korea Became a Global Carmaking Giant in Just 30 Years

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How Korea Became a Global Carmaking Giant in Just 30 Years

Starting at $4995 for ’86, the Hyundai Excel (’88 shown) boasted a Giugiaro design and a 68-hp engine capable of calling up 60 mph in 16.3 seconds.

From the December 2017 issue

Korea as it relates to the auto industry is largely a story about industrial conglomerate Hyundai. Founded in 1967, Hyundai (Korean for modernity) began assembling Ford Cortinas under license in 1968. The company’s first vehicle of its own design, the Mitsubishi-powered Pony, arrived in Korea in 1976. But it wouldn’t be until the 1980s that Hyundai would sell a car in our market. Although the media of the ’80s celebrated yuppies and their brand-conscious consumption of BMWs, there was then, as now, a vast population of price-driven Americans who were receptive to a new-car bargain, never mind its source. So when the 1986 Hyundai Excel—essentially a Giugiaro-bodied Mitsubishi Precis—burst onto the scene at the low, low price of $4995 (versus $6699 for a Honda Civic DX), Americans snapped up more than 150,000 of them. And the heretofore unknown nameplate sold more than 250,000 cars annually in its second and third years in the United States.

Three years, though, was all it took for Excels to start falling apart. Sales collapsed in 1989 and flatlined through much of the 1990s. In 1998, Hyundai’s then president, Finbarr O’Neill, introduced a 10-year/100,000-mile powertrain warranty (5 years/ 60,000 miles, bumper to bumper) to assuage quality concerns. Sales of the now four-model lineup—Accent (the irredeemably tarnished Excel’s replacement), Elantra, Sonata, and Tiburon—jumped a staggering 82 percent.

Meanwhile, fellow Korean automaker Kia followed Hyundai to the States in 1993, selling its $8495 Sephia sedan at select dealerships in the West. It achieved nationwide distribution within a few years, offering the Sephia and the compact Sportage SUV. Hyundai acquired Kia in 1998 but maintains separate marketing and sales operations for the two brands to this day.

Reading from Toyota’s and Honda’s playbooks, Hyundai established in 2005 a U.S. factory in Montgomery, Alabama; Kia opened a plant in West Point, Georgia, five years later. The two brands shared powertrains and platforms, but their positioning relative to each other was unclear. To change that, Hyundai brought in VW/Audi’s Peter Schreyer as design chief in 2006. Schreyer made Kia styling a differentiator and a key to the brand’s success. He now oversees design for both brands.

Hyundai XG300

Hyundai XG300

More critically, the decade-long push toward redemption that started in the 1990s helped Hyundai vanquish its quality woes. In 2006, the brand topped all other nonpremium makes in J.D. Power and Associates’ Initial Quality Study, and although that study measures design and ergonomics as much as it measures vehicle defects, it still holds sway over many buyers’ perceptions. Hyundai’s increasing legitimacy enabled it to poach U.S. executive talent—though the ambitions of its Korean bosses often led to short tenures.

Those ambitions extended to the luxury segment, as first indicated by the 2001 XG300, then by the Toyota Avalon–like Azera five years later. Hyundai got serious with the 2008 addition of the Genesis sedan, built on the company’s first modern rear-drive platform and powered by a newly designed V-8. A rear-drive Genesis coupe followed. Then came the larger and even pricier Equus—the $58,900 Lexus LS competitor included an iPad with the owner’s manual preloaded on it along with an app to schedule service (with complimentary pickup and delivery, naturally).

Genesis is now its own luxury brand, its existing sedan assuming the G80 nameplate. It’s joined by a new range-topping G90 sedan, with a G70 entry-luxury car on the way. And Hyundai continues to branch out in other directions. The new Ioniq, available as a hybrid, a plug-in hybrid, and an EV, clearly targets the Toyota Prius. Hyundai also has announced a performance subbrand: N.

The easy market-share gains may be in the past, as Hyundai’s U.S. sales topped 750,000 cars last year, and Kia’s neared 650,000. But 31 years after its arrival, Hyundai is now as ensconced in the U.S. as aging yuppies and BMW.

Hyundai’s U.S. Sales, 1986 to 2016

In its first seven months in the U.S., Hyundai sold 100,000 Excels. Quality woes caught up with the brand, and sales throughout the ’90s were consistently less than half of 1988’s peak. A massive push to improve quality, an industry-leading warranty, and a stream of new products paid off with an impressive resurgence in the 2000s.

Hyundai’s U.S. Sales, 1986 to 2016

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