Twenty years ago, Hyundai was developing the first generation Santa Fe, a crossover that helped the Korean automaker become relevant in America. And its been nearly ten years since the 2011 Sonata shed its status as an Accord clone to become something truly substantial. With that paradigm-shifting sedan firmly in the rear view mirror, Hyundai has stumbled as crossovers continue to surge in popularity. They’ve also struggled to achieve pricing parity with the Japanese. Neither of those challenges are impossible to overcome, but it will require the company to change its bad habits if it wants to survive in this era of uncertainty and technological upheaval.
The troubles facing Hyundai Motor Company have been hiding in plain sight: there is a mismatch between the products it has and the ones it needs. In China, Hyundai came in strong with a bevy of cheap vehicles that quickly got snapped up by value conscious shoppers. After a short while, the automaker decided to take the lineup in a more premium direction, which didn’t resonate with customers. And the competition began fielding their own entry level cars while Hyundai let their cheaper products whither on the vine.
Across the Pacific the story is largely the same. Hyundai, and its corporate brethren Kia, almost always undercut the competition by thousands of dollars, even in hyper competitive segments like the mid size sedan category. Those type of deals are harder to come by today, even as Hyundai tries to regain lost market share. Here is an eye opening excerpt from Reuters:
In 2007, the Sonata was 10 percent cheaper than Toyota’s popular Camry sedan but by 2014 it cost more, according to U.S. market research firm Edmund.com. Hyundai, which sold nearly 200,000 Sonatas in the U.S. market in 2010, sold just 131,803 units last year.
To a certain extent, Hyundai was justified in raising their prices from 2007 levels, as their products took a conspicuous leap in quality and refinement. That doesn’t mean customers will positively react to higher MSRP’s from a brand that established itself with bargain basement pricing. And that really is the problem. Car companies create their brands from the products they sell. Ford will probably be fine after they drop sedans because their truck and utility lineup resonates with buyers. And Subaru has struck gold by marketing the brand for people who desire “outdoorsy” type vehicles. To the average buyer, Hyundai’s products have gotten a bit better and a whole lot more expensive.
Hyundai also failed to predict the rapid rise of crossovers. Other car companies were also late to capitalize on the trend, but for Hyundai the problem partially stemmed from a uniquely Korean affinity for sedans, a trait that our own William Stopford discussed back in September. This has greatly impacted Hyundai’s effort to make inroads in the luxury market, as the Genesis division does not offer any type of crossover or utility vehicle, nor has any such product been announced.
Kia is affected by these issues as well. The company has successfully fashioned its own identity to the point where it at least looks like a quasi-independent organization on the surface. In reality, every Kia is just a Hyundai and vice versa, with few exceptions. That means a Kia problem is also a Hyundai problem. The Kia Stinger, which debuted this year, is the sixth sedan in the Korean automaker’s American lineup. And two of those models – the Cadenza and K900 – sold just under 8,000 units combined for the 2017 calendar year.
Hyundai is also under increased scrutiny to recall up to three million cars over concerns they may be prone to fires. Major recalls inevitably happen from time to time, but the difference between a faulty airbag and a vehicle that can spontaneously combust is stark. The timing is unfortunate because the Koreans continue to produce reliable cars overall, a feat that has repeatedly been recognized by Consumer Reports and other organizations that monitor vehicle quality. The issue is compounded by cars that were repaired yet still caught fire.
There appear to be many storms on the horizon for Hyundai. That doesn’t mean they’re down for the count. Crucially, their crossover lineup has received some substantial updates this year in the form of the new Santa Fe and the refreshed Tuscon. The subcompact Kona received significant praise from journalists and appears to be selling well despite being a bit late to the party. And the Kia Stinger has won over the enthusiasts too.
They’re also a bit ahead of the competition with regards to electrifying their lineup. The Kona electric, which boasts a EPA range of 258 miles, arrives next year. Tesla is the only other automaker that currently offers a fully electric vehicle capable of going over 250 miles on a single charge. The Koreans potentially have years before the competition catches up, which puts them in an extremely favorable position to be a leader in EV sales.
But competitive advantages can disappear quickly in the automotive industry. Just look at how Nissan swooped in and took over as the value leader in multiple segments. The Koreans will have to make some difficult decisions going forward about how to make Hyundai and Kia resonate with customers in the United States and China, especially as the competition remains as fierce as ever. Meeting Nissan head on is an option, but regardless of what Korea does, it needs to enact changes soon, or it risks becoming a niche automaker. Or worse.
Sources:
“How Hyundai Motor, once a rising star, lost its shine” – Reuters
“For Hyundai and Kia, risk goes beyond fire” – Automotive News
Related Reading:
CC Global: South Korea – Where The Sedans Still Thrives by William Stopford
CC Visits The 2018 NY International Auto Show, Part 5: Hyundai And Kia by Edward Snitkoff
Future CC/Driving Impressions: 2017 Genesis G90 – The Korean Lexus by Brendan Saur
Very interesting read. Curious to see which direction they will take next.
Thank you for the brief but very insightful summary.
I know very little about the two. The lack of SUV/CUV depth was not obvious to me as I don’t care for or follow that type of vehicle. But I understand the impact.
The Koreans seem to have many advantages; I hope they do not squander them. They make wonderful rental cars.
I can see why Hyundai is in trouble. They cost a lot more like you said, but the quality isn’t holding up on their newer models. I have friends with a sonata and an optima.
The optima just had the entire motor replaced under warranty with only 44k miles on it.
And the woman that owns it does all the maintenance required.
Thee guy that owns the sonata has 153k miles on it (it’s a 2013). The steering wheel clanks and thuds while driving and no one can figure out why. The interior is falling apart and he is the only guy that rides in it. The newer cars don’t seem to be built for the long haul.
My older Hyundai’s didn’t last much past the 150k mile mark, but they ran great with basic maintenance. And the initial cost for those was a whole lot less than what my friends paid for their cars.
We had a Kia Rio. Nightmare of a car with nightmare service. A close friend has a 2016 or ’17 Sanda Fe. Rides a bit harsh and has rock hard seats. I won’t be buying either brand.
I had to re-check the date of this article as I could have sworn the Kona was introduced to the US market 6 months ago.
As a quasi bargain shopper, and someone interested in cars that get better than average fuel mileage, I looked this summer for a deal on a Hyundai Ioniq. Dealers seem to be loathe to stock them yet I found one dealer in my area that had 3 that were 2017 models.
Kia dealers in North Florida have/had(?) a HUGE inventory of Souls a few months ago and I was surprised to read that a 3rd generation will hit showrooms soon. Isn’t that a car that has pretty much done all there is in its segment?
And I agree that Hyundai-Kia is a bit top heavy when it comes to sedans.
Oh, yeah, you can’t swing a dead cat in Florida without hitting some geezer in a Kia Soul. I firmly believe that the Soul has replaced the old PT Cruiser and Chevy HHR retro-mobiles as the go-to choice for the geriatric crowd since they no longer build the Mercury Grand Marquis (although, I suppose there’s still some Buicks the more well-to-do seniors might buy).
Geezers love boxy cars like the Soul, Honda Element, Scion xD. My dad goes on about how excessively slopey the windshields are on newer cars and this makes them less space efficient. He also misses wind wings.
The seat height makes them easy to get in and out of.
New Soul for an old soul?
As a Kia owner, you would think that I would have a better handle on the models that Hyundai and Kia offer, but I continue to find their lineups confusing with a constant infusion of new names.
I have noticed what you say on pricing – there was a time when you bought these cars to save money. Now the cars have to sell on their features and quality because they are priced with everything else. I am sure that (with the right product) they will eventually get there, but it will take awhile to get past the low-end reputation the brands built up early.
I am surprised that they do not hype their warranty more – I think it is still the best in the industry.
Never could figure out the difference between the Hyundai and Kia brands. Is one more upscale?
No. Kia is supposed to exude a somewhat sportier-edgier vibe, while Hyundai is the more conservative. Or that’s the way it was a few years back.
Genesis = Cadillac = Lexus
Hyundai = Chevy = Toyota
Kia = Pontiac = Scion
Being like Pontiac or Scion doesn’t seem like a viable marketing strategy….
I have the same problem, too. Some says it’s like Chevrolet and Pontiac…or even Buick and Oldsmobile. Too much of similarity to be distinct.
I thought Kia was the one with nicer styling…
“The Koreans potentially have years before the competition catches up, which puts them in an extremely favorable position to be a leader in EV sales.”
In fact GM doesn’t even make their own motors, controllers or batteries for the Chevy Bolt, they all come from LG in Korea.
The trouble is that the marketplace is not demanding electric vehicles, so that advantage will only carry Hyundai so far. Compare to Subaru, which as far as I know offers zero electric or hybrid vehicles, yet has experienced overall consistent growth year after year. The vast majority of consumers are just not clamoring for electric cars. They are still too expensive and too limiting.
Supposedly Subaru has a hybrid version of the Crosstrek, and I think at least 1 other model…can’t say for sure.
There is, indeed, a Crosstrek Hybrid. Two versions, in fact. But the first one offered very little value. The premium was high and the improvement in fuel mileage was small. As one might expect, they ended up, in industry parlance, “nailed to the showroom floor”.
But I believe the latest, improved version has a better system which gives fuel mileage that comes much closer to justifying the higher price.
They’re so thin on the ground I’d forgotten about those. Don’t think I’ve ever even seen a hybrid Crosstrek on the road, assuming they have a badge calling out the feature, and Subarus seem to be all over the place. I wouldn’t be surprised to find they’ve tapped Toyota for the new version given the 20% stake Toyota has in Subaru.
I think Hyundai/Kia will be just fine.
I have always questioned the impact of the so called “value conscience shoppers” The days of the skinflint buying the cheapest car on the market and forgoing any creature comfort options in a car to get it are long over.
If value conscience shoppers existed as a huge potential car buying force in the USA, the Mitsubishi Mirage would be the best selling car in the market or at least you would see more on the road.
That said I cannot believe that the Sonata is more expensive then the Camry.
I looked at both the local Toyota and Hyundai Dealers websites for the MSRP on 2018 cars
A regular run of the mill 2018 Camry SE is $28,474. A Camry LE is $26,399. By contrast the Hyundai Sonata SEL (which would be the equivalent of the Camry SE and LE option wise) is $25,020
A entry level Camry L is $24,819 while the entry level Sonata is $23,195.
This is Auto maker MSRP and not a dealer price. Plus Hyundai offers more standard features. The entry level Sonata SE has standard blind spot detection but the Camry L does not even have it as an option.
I live in Maryland and it seems like everywhere you look there are Kia and Hyundai vehicles.
The thing that has not been mentioned is the Elantra. The Elantra sells very well and the EPA classifies the cars interior room as a midsize car. It certainly is very roomy for its smaller outside dimensions. I am sure the Elantra has been taking a bite out of Sonata sales because of its cheaper price and its roominess.
I am pretty sure what we are witnessing sales wise with the Sonata is the same as folks witnessed with the first generation Oldsmobile and Buick GM W body cars. Those W body lost sales to ether the A body (due to it being cheaper and just as roomy) or the Lesabre (which did not cost much more and was more car for the money)
In the Sonata’s case folks are probably buying an Elantra or a Tucson
I think Hyundai is in good shape. They have 3 attractive crossover/SUV which are popular. They offer Hybrid cars (Ioniq and Sonata Hybrid), Electric cars (Ioniq and the future Kona Electric). The Elantra is very popular.
I actually just bought a 2018 Elantra back at the end of September. It was during the 2018 model year closeout. I got it for about $16,000 and some change. By contrast the 2 Honda dealers would not budge off of their close to MSRP price on the Civic or Fit. (I am sorry but while I might have paid close to MSRP for a Honda in 1998, in 2018 there is no reason to do so)
I like the car and it does have features in it that I would need to step up a model on the Honda to get.
In my experience, the only time you can get a dealer to budge on a Honda is when the model you want is about to be extensively revamped or when Honda goofs (as they have a few times with the Civic) and obvious cost-cutting on a brand new model turned off buyers as in the 2012-2014 Civic.
The Fit will be extensively redesigned for 2020 or 2021, as the current design went on sale for the 2015 model year.
Not sure how you ended up with the MSRP pricing you did Leon, as what I see from toyota.com and hyundaiusa.com are quite different. In most basic form a Sonata does undercut a Camry to the tune of about $1,500, but Toyota comes with a much higher level of overall active safety. No blind spot monitoring, but pre-collision sensing with pedestrian detection, lane departure warning with steering assist, and adaptive radar cruise control. Pre-destination charge, entry point for a like-for-like model having all the above mentioned safety tech is $25,435 for Sonata SEL versus $25,550 for Camry LE. The gap is negligible at that point.
I went by the prices of the local dealer that owns a Toyota and a Hyundai franchise (Antwerpen)
I find looking at the MSRP listing on the window sticker at a dealer or on the website of the dealer(Not the sale price but MSRP) reveal a different MSRP price then the one on the Hyundai/Toyota USA site when you build the model.
In my case the MSRP price on Hyundai USA website on my 2018 Elantra was $22,948 but looking at the window sticker(I have it in my hand as I write) shows it at $21,128 and this is will all the dealer added fluff.
There is a disclaimer that the MSRP is subjected to change on the websites of the car makers.
I wonder if the article that was put out saying that Hyundai vehicles cost more was done by checking the car maker’s website instead of looking at dealers websites?
Plus that does not reflect the fact that you can get a Hyundai at a substantial discount. In my area(Maryland) there seems to be more and more Hyundai vehicles every year.
value conscious, not conscience
I had occasion to rent an Elantra for a month last year in Florida. I had requested a midsize and was not happy when I was presented with it, but after driving it for a month, I was very impressed with it. Ran and drove very nicely, comfortable, solid body and easy-to-figure-out controls. If I were in the market for a car like this(I’m not), I’d certainly give it a shot.
I remember when the über-cheap Yugo came to the US. Priced at a low MSRP of just under $4,000, it was so craptacular, it came and went, never to return.
At the same time, for an extra $1000, you could get a Hyundai Excel. The Excel was every bit as bad as the Yugo (some say worse). But, somehow, Hyundai managed to survive the Excel. Subsequent cars improved just enough to be competitive in that bottom-feeder segment that caters to those who want a brand-new car with a warranty, but have very little cash and bad credit. Today, those folks are buying a Mitsubishi Mirage (or maybe a Chevy Spark).
With that said, despite the good experiences of some (JPC and his minivan), I just can’t shake the less-than-stellar quality reputation of the Excel that the Koreans still bring to the party to this day, especially now that they’re wanting the same money as other vehicles that don’t have that kind of baggage. Yeah, Hyundai/Kia vehicles are built substantially better than that hoary old 1985 Excel, but I’m still not feeling they’re at the level of the competition and, frankly, not worth the extra coin. If I’m going to pay Toyota/Honda prices, well, I want Toyota/Honda reliability.
And then there are the requirements for that great Hyundai/Kia warranty. I vividly recall that one of the big stipulations to keep the long warranty intact was that it was mandatory to have the vehicle serviced at stealerships where, as one might imagine, they charged top dollar for the frequent routine maintenance intervals. I don’t know if that’s still the case (I believe there have been lawsuits over it when outside maintenance was performed as required, but warranty work was then denied) but it’s that sort of sleazy thing that makes me steer clear.
About a year or two ago I had to rent a car for a few days. My first rental was a Dodge Dart, the second was an Elantra. Vaguely similar cars, but for some reason I preferred the Dodge….even though the Hyundai came across as a slightly better built car.
Hyundai instituted a longer than normal warranty to distance themselves from Yugo. My beef with Hyundai and Kia is that they may have that long warranty but dealers are VERY reluctant to honor it, especially the Kia dealers. And the whole dealership experience at Kia is reputed to be barely better than the experience at a Mitsubishi dealership.
Mitsubishi also sold the badge-engineered Excel as Precis from 1987 to 1994, which must show that Excel had ascended out of craptola level…only if barely.
Put me up for another one who’s had excellent luck with Kia. My first was a Ford Festiva back in 1990. Excellent car, gave me very good service.
The memory of that car came back when my then-girlfriend was looking for a replacement for her beat to death Explorer, and her credit rating at the time was bad enough that she was pretty much limited to the back row of a reasonably honest buy here/pay here lot. Found an 06 Kia sedan (forget the model name, but it’s now called the Forte), and based on my memories of the Festiva we decided to take a chance.
Cheap interior, but an excellent car. Served her well for years until she got her credit rating up well enough to buy the current Dart. And we were looking for another Kia when she fell in love with the Dodge.
And there’s my 08 Sedona with 130k on it. Been absolutely reliable, comfortable on the long hauls (it’s my reenactment car), and the only reason it won’t be replaced with another is that you can’t remove the middle seats on the third generation vans.
My only gripe about Kia is that they’ve made it virtually impossible to get a manual transmission anymore on anything but the base line Rio.
It was a Spectra, i remember reading.
Here in Europe it was called the Cerato
They sure didn’t study the Chrysler Imperial debacle!
Eh, they’ll be fine. Yes, they are sedan heavy, but they are adding SUVs as they go along, and they do have the Santa Fe, Tucson, Kona, Niro, Sportage, and Sorrento. As they add a larger 3 row to both brands, plus a “pickup” like CUV, they sell to a large enough demographic to ensure long term survival. Genesis is another story. They need a luxury SUV pronto, and it better be a damned good one for about $10K less than a similar Lexus or Infiniti to get butts in the seats.
The whole sedan thing is a bet. Ford bet against, Hyundai has bet for them. With fewer available, they may be the last team standing, and if and when gas goes back up or tastes change again, they may see it pay off. Then again, they may not. That’s the nature of a bet. You pay your money and you take your chances.
I can say from experience that they can put out good product. I had 3 vehicles from them over 10 years. None spectacular, but all good. And all good value for money. They are not enthusiast cars, but they get the job done. And oh yeah, the Soul is the official car of the nearly dead of Florida. I believe that they come with an AARP card standard, but they are EVERYWHERE down here.
Peter “Autoextremist” DeLorenzo maintains FCA sells off Ram and Jeep to Hyundai/Kia and takes the rest of their native offerings back to Europe (despite his having bought a Alfa Romeo Stelvio, which he reports he continues to enjoy.)
I stopped reading him years ago. His batting average was never that good, but it’s rather fallen off a cliff in recent years.
here’s the problem with that: FCA is worth roughly the same as H-K put together, and has vastly bigger profits (Hyundai’s profits just crashed, as did their stock). And that’s all the result of Jeep and Ram; without it, FCA is essentially worthless. H-K can’t begin to afford to buy FCA. So that’s not going to happen….dot.com.
The whole spiel about FCA just grooming itself to sell off Jeep and Ram is pretty lame, and rather was from the beginning. There’s no value in anything other than those two brands.
BTW, FCA isn’t worth that much less than Ford.
This article seems to assume there is only one market in the world; there is not, and Hyundai is doing very well in developing countries.
That said, I leased a Kia in 2015, mostly because it was dirt cheap. By 2018, a Kia cost as much as anything, and other brands far more attractive for me, anyway.
I have friends who grew up in third world countries, and Hyundai has a better reputation than the Japanese brands in many of these places.
I completely agree with the sentiment that Hyundai lost their styling edge on the Sonata after 2014. I purchased a new 2014 Sonata Hybrid in early 2015; it still had the 2011 styling, which I found wonderful. Not long after my purchase the 2015 Sonata was introduced, and upon seeing it I was disappointed in the more conservative direction both the exterior and interior lines went. Both went from exciting to outright bland, and has not improved much since.
My Sonata hybrid was a wonderful car; it did not give me any trouble at all in the three years of ownership prior to selling it to purchase a Tesla Model 3. When I was in the process of buying a sedan three years ago, it came down to choosing between a Ford Fusion Hybrid and the Sonata Hybrid. The Sonata turned out to be less expensive, and it drove better than the Fusion (Fusion had a bit better ride, however) from a drivetrain standpoint. A friend of mine now has an Ionic hybrid; he loves the car, and he formerly drove Corvettes for years.
Hyundai needs to distinguish itself once more not only by QC improvements on engines, etc., but by taking its styling in a more exciting direction, again. They currently have the most efficient electric car on the market, the Ionic BEV, so they know how to do electric cars well. I would like to see that car more widely offered to the public than it currently is.
Interesting observations I hadn’t thought about before. I’ll say this about Hyundai:
My wife and I bought a 2005 Tucson new and were happy enough with it to trade it in on a 2014 Santa Fe nine years later and we are also totally happy with that one. I think Hyundai sustains a lot of its business with customer loyalty.
The Stinger is irrelevant. It’s a car that appeals to internet “enthusiasts” who never actually buy anything, they just expect automakers to make unsellable cars so they can fawn and argue about them on the internet. 1,300 sales per month is a stinker. That thing better have really high margins else it will be gone soon.