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| Hyundai gnaws Toyota's lead, job loss concerns help sales |
| Bloomberg / Los Angeles Mar 06, 2009, 00:01 IST |
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The worst US car market in 28 years doesn’t bother George Glassman, a car dealer in suburban Detroit. He sells Hyundais.
“Last week a customer traded in his Lexus for a Veracruz” sport-utility vehicle, said Glassman, whose dealership is in Southfield, Michigan. “That didn’t happen before.” Hyundai Motor Co, Asia’s fourth-largest carmaker, has been winning sales with an offer unique to the industry, it will buy back cars from customers who lose their jobs. With unemployment forecast to rise this month to the highest since 1984, the Seoul-based carmaker boosted US sales 4.9 per cent so far this year as Toyota Motor Corp’s sales plunged a record 40 per cent last month.
“The crisis has provided Hyundai an opportunity and they grabbed it,” said Kang Shin Woo, chief investment officer at Korea Investment Trust Management Co. who oversees $5.8 billion in equities including Hyundai shares. “The aggressive marketing strategy gives them an advantage over rivals.”
The company has been able to hold down US prices because of a 29 per cent drop in the value of the Korean won against the US dollar in the past six months. In contrast, the Japanese yen’s 8.3 per cent gain against the dollar in the same period has crippled exports.
Hyundai’s best-selling model, the Sonata sedan, starts at $18,700 compared with Toyota’s $19,175 Camry. Sonata sales were little changed in the first two months of the year, while Camry sales plunged 38 per cent.
“The sicker the economy gets, the better this offer looks,” said Dave Zuchowski, Hyundai’s vice president of US sales, in an interview on Thursday. “We knew coming into the year we couldn’t go to market the way we traditionally do, and needed something that addressed what was happening in the economy.”
No vehicles have been returned yet under the program that started January 2, Zuchowski said. Hyundai’s US sales unit has set aside reserves for costs that may arise, he said, without giving the amount.
Along with the job-loss programme, Hyundai and affiliate Kia Motors Corp offered record incentives in February, said Jesse Toprak, director of analysis for auto-research firm Edmunds.com in Santa Monica, California. He estimates Hyundai offered a total of $3,031 per vehicle, while Kia’s spending grew to $3,546.
“The value proposition of Hyundai and Kia continues to grow,” Toprak said in a March 3 conference call. “They also spent extraordinary amounts in incentives.”
Hyundai’s shares have jumped 26 per cent this year, outperforming Toyota’s 2.8 per cent gain and Honda’s 19 per cent rise.
A decade ago Hyundai rebounded from collapsing US sales by adding the market’s longest warranty, covering all major components on its models for 10 years or 100,000 miles. Just as that programme eased perceived quality risks in buying Hyundai vehicles in 1999, the assurance programme seems to be helping customers commit to a purchase as the economy shrinks, said Hyundai’s Zuchowski.
Industrywide car sales last month fell to the lowest level since December 1981. US employers probably shed 650,000 jobs last month, the most since 1949, according to the median estimate in a Bloomberg survey before the Labor Department’s March 6 report.
General Motor Corp, surviving with the help of government loans, posted a 51 per cent drop in sales in the first two months of the year. Chrysler LLC’s sales plummeted 49 per cent and Ford Motor Co’s declined 44 per cent.
Toyota is forecasting the first loss in 59 years as sales in the US, traditionally its most profitable market, dropped 36 per cent this year. The company is seeking loans from Japan’s government to support financing for North American customers.
Along with the vehicle buyback option, Hyundai has been helped by the introduction of the Genesis sedan, picked as North American Car of the Year at the Detroit car show in January. The luxury sedan starts at $32,000 and competes with Toyota’s Lexus GS 350, starting at $45,000.
In February, Hyundai was a primary advertiser for both the National Football League’s Super Bowl and 2009 Academy Awards, among the most highly viewed US television broadcasts.
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