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Stopping Hyundai's success? Not likely

Posted by Bill Griffith  February 17, 2012 04:30 PM

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CHICAGO—The Hyundai phenomenon ranks as one of the most impressive business turnarounds of the past quarter century. The company went from being both a punch line and punching bag to slugging it out for supremacy in the United States market.

It’s a symbol of how far the company has come that the compact Elantra sedan was voted North American Car of the Year for 2011, and Hyundai was No. 6 in US car and light truck sales last year. If you combined Hyundai and sibling Kia’s sales last year, they’d have been No. 4 overall behind Ford, Chevrolet, and Toyota, all of whom have pickup trucks as significant parts of their sales portfolios.

And there’s more growth in sight. Earlier this month at the Chicago Auto Show, Hyundai president and CEO John Krafcik introduced two variations of the Elantra sedan—a two-door coupe and five-door GT (hatchback).

Joe Weisenfelder, executive editor of Chicago-based Cars.com, boils the Hyundai success story into a simple explanation.

“Hyundai encapsulates the saying that industry executives always use; namely, ‘It’s all about Product.’ They use Product in the singular and say ‘There’s no problem that Product can’t solve.’ They always use that line, then they throw lots of money into the marketing budget instead,” he says.

“And Hyundai’s product has become very good. They worked relentlessly on their shortcomings and got to where they were doing pretty well with quality and features, but they still were a little behind on things like fuel efficiency and crash tests.”

No longer.

“Look at the most recent products, the Sonata and Elantra. They’ve got good crash test results, and fuel efficiency is quite high. We can argue EPA ratings but the Elantra is rated at 40 miles per gallon on the highway with either manual or automatic transmission. Some of their competitors are advertising that 40 mpg, too, but often it’s with a special version such as the Cruze ECO or Focus SFE,” says Weisenfelder.

Krafcik, the CEO, addressed those mpg figures in Chicago, calling attention to a Popular Mechanics test of the Elantra and Focus. “At 55 mph the Elantra achieved 47.6 mpg and the (Ford) Focus 47.5,” he said. “Then, at 70 mph, the Elantra got 39.3 mph and the Focus 33.5.”

While introducing the coupe and GT, Hyundai’s Michael O’Brien, vice president of product (that word again) and corporate planning, said that as American consumers consider downsizing for fuel economy, they still want premium content and choices.

Why a coupe? “Singles don’t want a sedan because that screams ‘family,’ ” he says. “and driving enthusiasts will be attracted to the GT because it has European driving characteristics, emotional and streamlined styling and more interior space than competitors for an active lifestyle.”

Krafcik didn’t seem fazed by President Obama’s fleet goal of 54.5 mpg by 2025, noting that Hyundai had a 36.1 fleet average in 2011, a number that rose to 36.7 this January. “We’ve got six variants with 40 mph ratings,” he said, enumerating them: the Accent sedan and five-door, the Veloster, Elantra coupe and sedan, and Sonata hybrid.

It seems that Hyundai (that’s Hyundai-as-in-Sunday) has supplanted Honda as the reigning mpg champion.

Cars.com’s Weisenfelder has an explanation.

“Hyundai is keeping weight down. As a result, their vehicles tend to be a bit noisier inside. When Honda was the undisputed fuel efficiency leader, their vehicles had the same issue. They tended to favor fuel efficiency over noise reduction. The simple fact is that you have to add weight to cancel noise.”

Some Hyundai news of note:
• The company last month announced a lifetime hybrid battery guarantee for the 2012 Sonata hybrid—an industry first. It’s reminiscent of the 10-year, 100,000-mile warranty the company used to attract buyers as it originally climbed back from irrelevancy. Says Hyundai’s O’Brien, “Even with all the hybrid vehicle options on the market today, there is still limited demand for these vehicles because of barriers to customer adoption such as uncertainty about the technology and performance. By offering this guarantee, Hyundai is addressing customer concerns and demonstrating our confidence in the durability of our product.”
• Hyundai has been the presenting sponsor of the Tournament of Champions golf tournament in Maui for two straight years. The Hyundai Tournament of Champions is the PGA Tour’s season-opening event. Important? Golf attracts an upscale viewer. The sponsorship tells where Hyundai is headed.
• Could it be more racing? Hyundai is in rallycross and drifting and had an electronic racing game in big lights in Times Square this winter.
• Upgraded dealership facilities? That is a major issue for the National Automobile Dealers Assn. Last week, the industry publication Automotive News reported Hyundai was said to be considering having its dealer network make room for a “Genesis” sub-brand area in showrooms for the upscale Genesis and high-end Equus.
• Super Bowl ads. The best had Elantra “tooting its own horn” on a joyride, but others touted the performance (power and handling) of Genesis and Veloster and employee togetherness.

Local dealer Herb Chambers has two Hyundai dealerships.

“Hyundai is really doing well. We’ve been with them since the beginning. In the beginning they were cheap—both in price and the way they were made. Over time, they’ve brought quality up to be comparable to everyone, including the domestics. It used to be Honda and Toyota, and everyone else wasn’t quite as good. That delta has closed.”

Is that just dealer-speak?

“No,” says Chambers. “The domestics are as good. I know because we sell both and the residual values of American cars have gone up. They’re holding their value much better. Before, we could give you a great deal on buying them new, but they weren’t worth as much when it was time to trade. Now that’s turned around. It’s a level playing field. And Hyundai now matches them all.”

And what about that Hyundai styling? Chambers keeps an eye on what’s passing on the roads outside of his dealerships.

“I really like the styling of Hyundai’s cars, but sometimes I’ll see one and ask, ‘What’s that? A Mercedes?’ Then I realize it’s a Hyundai. Mercedes must be ready to strangle these guys because they’re interesting-looking cars.”

Bill Griffith can be reached at WGriffith@globe.com. Follow him on Twitter @MrAutoWriter.

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Clifford Atiyeh is an automotive writer and car enthusiast . He has spent his entire life driving cars he doesn't own.
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Bill Griffith is a veteran Boston Globe reporter, having reviewed cars for more than 10 years and serving as assistant sports editor for 25 years. He was also the paper's sports media columnist.
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AAA's Car Doctor, John Paul John Paul is public affairs manager for AAA Southern New England, a certified mechanic, and a Globe columnist. He hosts a weekly radio show on WROL.
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