As a U.S. car brand they are approaching 25 years old and many of us still can’t pronounce their name correctly. Their first American model, the Excel, rivaled the shoddy Yugo with its quality problems. In 2006, their CEO was arrested and charged with embezzling over $100 million. But make no mistake; Hyundai has gone from a footnote to a major player in the U.S. and around the world.
Their success may be little noticed, but it is impressive: According to their own web site, Hyundai Motors’ worldwide operations posted a billion dollar profit in the first quarter of this year. A billion in one quarter? Two bankers from Goldman Sachs can fake a billion dollar profit over sushi and martinis, but for the auto industry it’s smokin’. With market share in the U.S. growing by 50% in the last three years, Hyundai is performing equally well globally and is now ranked as the fastest growing automaker in the world by the Detroit News.
Hyundai (as they point out, it rhymes with “Sunday”) has gone from a punch line on Letterman to the envy of Chrysler and particularly GM, who recently recruited Hyundai’s former VP of Marketing to head the marketing of all their brands, with a particular focus on the flagship, Chevrolet. But it will take more than a hot hand at the marketing wheel for GM to match their Korean rival. Hyundai has grown in large part by building a brand that has responded to the demands of the middle market far better than many of its larger, more established rivals.
For about 10 years after their introduction to the U.S. with the popular, but low quality Excel, Hyundai occupied the value-priced bottom of the market. There was no confusing them with their Asian rivals in Japan in terms of quality, consumer loyalty and brand power. But in 1998, following a major management shake-up, Hyundai embarked on one of the most challenging of all brand tasks, moving the brand up market from a value-priced segment.
Their first move was hardly a new idea, but it was a big step: A 10-year/100,000 mile warranty on all its cars. A similar program, a 7-year/70,000 mile version, had helped Chrysler survive near extinction in the 1970’s. But, of course, a great guarantee isn’t so wonderful if your customer has to make repeated warranty claims. Hyundai backed up its new warranty with a comprehensive program to improve manufacturing quality, design, and research and development.
Gradually Hyundai moved away from exclusively offering low-priced econoboxes to providing a wide range of products that competed effectively with mid-market brands like GM, often by imitating the styling and features of more upscale brands such as Lexus, Acura and BMW. In 2004, J.D. Power and Associates ranked Hyundai second overall in “Initial Quality.” Many of its models now boast the highest possible 5-star government crash test ratings. In 2009, the Hyundai Genesis was named Car of the Year at the North American International Auto Show. At a price tag of $38,000 for the V-8 model, Hyundai established itself as a major player in multiple segments of the U.S. market.
But it was also in 2009 that Hyundai demonstrated its continuing ability to innovate quickly and seize a market advantage when it introduced the Hyundai Assurance program that promised to take back any new car purchase if buyers lost their jobs and were unable to make payments. Though quickly imitated by a floundering GM, the Hyundai version of the plan helped them increase market share and maintain sales at a time that nearly all other car makers, even their Asian rivals, were seeing 25-35% drops in sales.
Hyundai’s ability to successfully stretch their brand from economy offerings to upscale luxury models is rare for any car brand. Volkswagen has tried a similar approach and largely failed in the U.S., and now ranks far behind its Korean rival in U.S. sales. Other brands such as Toyota and Honda have created separate upscale brands. But Hyundai’s brand building success could be a lesson to many companies: making claims is one thing, backing them up is another and makes all the difference. Now, as their rival Toyota is struggling to reconcile their image with their actions, Hyundai continues to improve its brand by making more big promises and delivering them with each new vehicle they sell. At this rate, it won’t be long before we all get their name right. Warning to Honda and Toyota: That Hyundai in the mirror is closer than it appears.