For years, Hyundai (which also includes the Kia brand) was considered mediocre in terms of styling and quality when compared to the Japanese Big Three (Honda, Nissan, and Toyota). Today however, much has changed for the Korean auto group as it has released multiple vehicles which have been lauded for their styling prowess and uniqueness from the competition. With the newly designed Hyundai Sonata in 2009 and the Kia Optima in 2010, Hyundai finally overcame its ever apparent styling slump and has transitioned itself to the forefront of the American auto market. From a consumer standpoint, these two models have together changed the face of Hyundai in the U.S.
The Optima has won numerous recognitions including the NHTSA 5-Star Crash Safety rating, the 2012 IIHS Top Safety rating, as well as a Consumer’s Digest’s 2012 Best Buy. The Sonata, marketed as a four door coupe, has won the 2012 Driver’s Choice Award for “Best Family Sedan” from Motor Week, was labeled a 2012 top safety pick by IIHS, and was part of the list of the top 10 vehicles for under $25,000 by Kelley Blue Book, along with many other awards. When looking at the segments in which Sonata and Optima compete, which is primarily the mid to large size family sedan, there is stiff competition from the Japanese automakers as well as the Americans. For decades the Honda Accord and Toyota Camry have been labeled as the number one selling family sedans in the United States but it’s clear now than Hyundai, once an underdog is putting up a strong fight to take that spot from them.
Hyundai had a very humble beginning in the U.S. which began in 1986 with the introduction of a just one model, the Excel, which was available as both a four door sedan and as a hatchback. That year Hyundai set a record in first year in business sales with 168,882 units sold. Initially the Excel gathered a huge draw because of the variety it offered in terms of trim levels. Ultimately however, it proved to be a flash in the pan as sales quickly dwindled due to the lack of vehicle quality and reliability as well as multiple vehicle recalls. Although Hyundai faced much ridicule following the failure of the Excel and dealerships struggled to stay open, this did not discourage the Korean automaker. Over the next two decades Hyundai expanded its presence to include a full range of vehicles that would compete with all the other established economy brands.
Hyundai entered the American market at a time when other foreign makers, had already established brand loyalty and a strong following for their products. In order to diversify itself from the competition it was vital that Hyundai employ a strong tactic that would demonstrate the company’s commitment to its buyers. Hyundai’s 10year/10,000 mile vehicle warranty, introduced in 1999, was that strategy. Before Hyundai introduced this promise, it had never been done before by any other manufacturer. This warranty was proof to American consumers that Hyundai, as an automaker, was going to stand behind its vehicles and offer a higher level of protection for the consumers.
Hyundai continued to exhibit this commitment when, in 2009, in the midst of the modern economic crisis, it launched its Assurance program which allowed owners to return their vehicles if they became unemployed within a year after their purchase. This was an incredible marketing tactic on the part of Hyundai because at a time where many of the big American automakers were being bailed out by the government, Hyundai was still putting the customers and their needs above all else. In terms of the financial impact of the program, it was extremely cost effective because even after it was initiated there wasn’t a huge take up on the offer.
Hyundai succeeded in strengthening its image despite the fact that the number of returned vehicles never really reached a truly measurable number. Had the job market declined enough, Hyundai may have had a disaster on its hands, but luckily it never reached that point. In 2011 Hyundai expanded the Assurance program so that it guaranteed trade in values for up to four years after the date of purchase.
Without a doubt, the greatest struggle that Hyundai has faced over its 26 year history in the U.S. has been its brand perception. Hyundai, unlike the Japanese automakers who have both high end and lower end brands, solely competes in the non-luxury segment.
For many Americans this perception was initially ingrained in their minds due to Hyundai’s problems with the Excel, and this left them scarred them well into the 1990s. One of the major mistakes that Hyundai made in terms of its marketing strategy was focusing on lower end vehicles with a price point well under $20,000. By limiting itself to that segment Hyundai produced competitively priced vehicles but could not realistically offer the build quality and innovative features that were required to sell mass numbers of cars and create a brand worthy to hold its own against the Japanese.
An analysis of Honda and Hyundai’s television marketing campaigns from the 1990s demonstrates a stark difference between these two companies. Whereas Hyundai focused on touting its comparability to competitors, Honda attempted to create an emotional connection between its brand and its buyers. Quoting a 1996 Honda Accord commercial, “At Honda, long distance performance is something we hold in very high esteem”. Honda’s campaigns strived to convey that it was the brand for not only first time buyers but the brand for every buyer who held quality and reliability above all else.
The Winds of Change
When Hyundai entered into the 21st century a lot of things changed and that included their business model. The company began to heavily invest in vehicle design and began experimenting across all lines. It began to win multiple awards for quality and design and was lauded by J.D. Power and Associates, one of the leading global marketing firms, on multiple occasions. 2006 proved to be a critical year as Hyundai beat rival Toyota in quality ranking and placed third overall. Just a year later it fell to twelfth place, but change was becoming inevitable.
In 2008 the Santa Fe and Elantra were recognized as top picks by Consumer Reports, and in 2009 the long awaited Hyundai Genesis Coupe and redesigned was released. This was Hyundai’s premium performance vehicle and it received a positive reception from critics and consumers alike. The Genesis sedan proceeded to be named the 2009 North American car of the year. In 2010 the Equus was released as a luxury alternative for current Hyundai owners seeking an upgrade. Although the Equus has had some struggles, Hyundai’s overall direction into the luxury market still seems promising.
The Kia brand has similarly turned itself around. Taken over by Hyundai in 1998 has been rebranded in the same fashion as its parent company. From its dated designs and awkward styling Kia is now best in class in terms of vehicle quality and innovation. The new Optima which has been publicly endorsed by NBA star Blake Griffin, is leading Kia’s sales and has truly broken the barrier on what Americans believed Kia was capable of designing.
Although the Optima has been Kia’s shining star, all the vehicles from the subcompact Forte to the Sportage SUV, are signs that Kia has been re-invented. In 2010 Kia set its own personal all time record with 356,268 units sold. With 2012 almost half-way over both Kia and Hyundai have been doing exceptionally well, with both brands performing well above what they were last year. Seven of Hyundai’s vehicles have been up in sales including the Accent, Equus, and Genesis, and Kia is on track to break many of its sales numbers this year.
Someone once said that “time heals everything”, and in the case of Hyundai this has been more than true. The Korean automaker faced many struggles during its initial years in the American market, but has now positioned itself in a place where it will be able to sustain growth and provide leading class vehicles to a public that is hungry for dynamic vehicles that not only stand out from the competition but give them a sense of liberation on the open road.
Congratulations Hyundai, you did it, you achieved the dream.
Jibbin Abraham is an undergraduate student pursuing a degree in Business and Marketing at Binghamton University. He enjoys following the latest automotive trends and developments in the U.S. as well as abroad and spends his free time reading various auto websites and blogs. His ultimate goal is to pursue a career where he can mesh his passion for business and for cars.