EagleTribune.com, North Andover, MA

October 6, 2013

Hyundai takes a breather this year

Motor Mouth
Jeffrey Zygmont

---- — Last week I drove a Santa Fe sport-utility wagon sent by Hyundai as part of its evaluation fleet for media folk like me.

The vehicle was everything that my experience with Hyundai had led me to expect: a solid, mainstream hauler that holds its own against any of the many medium-size crossovers that combine the high-riding security of a big SUV with the easy manageability of a passenger sedan.

You see enough Santa Fes on the roads everyday – along with other popular Hyundai models like the Tucson crossover and the Sonata and Elantra automobiles – that they blend right in. In the span of about a dozen years, Hyundai has grown to become a standard and accepted landmark on the American automotive scene.

But suddenly Hyundai looks stalled. So far, 2013 is turning out to be a boom time for auto companies, yet Hyundai isn’t sharing the big spurt in vehicle sales that is lifting other brands right now. It would be a real loss for us if the company’s heyday ends so soon, because Hyundai Motor America has recently made some big contributions to our auto market – not just in its own models, but in improvements it has forced from other manufacturers.

The good news is that the company’s current sputter appears to be only that, a sputter. And it has nothing to do with the popularity of its vehicles, which looks to be holding strong.

Headquartered in South Korea with car-making operations in America and around the globe, Hyundai started selling autos here in 1986. But it ran through about 14 years of low-level obscurity before a big boost in its stature began with the new millennium, around the year 2000. Now Hyundai sells American drivers more than twice the number of vehicles that it did 12 years earlier. It’s still a second-tier car company here. Total sales so far in 2013 are close to 550,000 vehicles. By comparison, General Motors and Ford are in the 2-million range, while Toyota has sold about 1,700,000 new cars in the U.S. through September.

Hyundai’s growth spurt was putting it closer and closer to the big guys each year. But what the company is missing right now is exactly that: the growth. So far in 2013, Hyundai’s U.S. auto sales have risen 1.6 percent over last year’s levels. The U.S. car industry as a whole is up more than 8 percent.

Its problem is that Hyundai’s factories were already running at full speed, with three shifts working 24 hours a day. It can’t build cars faster, and therefore it can’t put out all the vehicles that people want to buy.

“Hyundai knew going into 2013 that it likely would not keep up with market growth because of capacity constraints” at its manufacturing plants, said Joe Guy Collier, spokesman for Hyundai Motor America. “The line-up continues to be favorably received. It just doesn’t have the production capacity to meet the pace of growth.”

When quoted in an article late last spring by the business-news publisher Bloomberg, John Krafcik, Hyundai Motor America president, said that the company was working on boosting the output of its plants. Krafcik also noted that, during this year’s pause in its rapid growth, Hyundai was pouring excess energies into vehicle quality and customer satisfaction – two additional areas in which the car brand has made big gains during its 12-year rise.

Collier, the company spokesman, said the main reason for the company’s rise has been a string of hits as it introduced new vehicles.

“Hyundai dramatically improved its line-up from top to bottom,” he stated. “You can look at lots of different third-party indicators of this, but the North American Car and Truck of the Year Awards has been a pretty good gauge of the progress.”

Alongside the numerous other official citations and awards, the spokesman lists the Hyundai Genesis sedan winning the 2009 North American Car of the Year, and the Elantra taking it in 2012. “Sonata was a finalist for Car of the Year in 2011 and Santa Fe was a finalist for Truck of the Year in 2013,” he continued.

Locally, Dave Silvia of Salem Ford Hyundai in Salem, N.H., added the Hyundai warranty to the attributes accounting for the company’s popularity rise. Called Hyundai Assurance, the warranty covers a car for five years or 60,000 miles, with powertrain coverage extended to 10 years or 100,000 miles, fully transferable if a car is sold to a second owner. Hyundai advertises it as the best warranty in the auto business.

Another factor contributing to growth is vehicle quality, said Silvia, who is Hyundai sales manager at the Salem dealership.

“The Hyundai trades that I’m seeing now are coming in with 150,000 and 175,000 miles on them, and they’re still in good shape. I might see some paint worn off the radio knobs, but that’s about all,” he said. “People like the durability factor, that the car is a good car and it’s going to last.”

Today, across the whole American car business, we’re seeing a renaissance in vehicle design, with companies taking pains to give their models bold and dramatic, stand-out shapes. I credit that change to the 2009 introduction of the Hyundai Sonata sedan. With that model, Hyundai demonstrated that a mid-size sedan – a car type that was noted for sleepy, me-too design at the time – could be fresh, bold, dramatic and unique, and still be a solidly built, serious, crowd-pleasing car. We can thank the Sonata for the flashy, splashy sedans other companies turn out today.

A second big lesson Hyundai taught other car brands was that people are drawn to cars with features built in, rather than added on as extra-cost options. Hyundai pioneered the general approach of including a lot of popular features and equipment in a model’s base purchase price. Today, we get more bundled into even basic versions of many models because Hyundai pushed other brands in that direction.

A rarity in the auto business, Hyundai has been entrepreneurial. It’s been innovative, unafraid to experiment, willing to venture out on its own and explore new approaches – even as an upstart underdog against mammoth companies.

Those are admirable traits. We have all benefited from the company’s courage. I’m pulling for it to get over this case of hiccups and get on with more conquests.

Jeffrey Zygmont is an author of fiction and non-fiction books, and a long-time auto writer. Contact him at www.jeffreyzygmont.com.