Driver’s Seat

25 09 2010

It was somewhere around the late-1980s. My younger brother had just purchased a new car, a very inexpensive model from a relatively unknown maker. The Hyundai excel was the first entree from the Korean manufacturing giant to the American market, and it offered the perfect mix for budget-minded consumers: low base price and good mileage. It was a strategy used by Toyota 20 years prior as they tried to establish a presence on our shores.

That Excel did anything but excel, because it was a bucket of bolts.

So bad was that little car that I quickly dismissed the brand. It rattled as it went down the highway, leaving parts along the curb. You could get cited for littering.

But the Koreans were not willing to let this misstep kill their chances. They regrouped, retooled and reintroduced. Today, they have nearly a 5% US market share, which is phenomenal in our crowded marketplace. They even have a manufacturing plant in Montgomery AL.

And they are hungry to grow that share by going up-market with ever more prestigious cars aimed squarely at luxury import competitors. Take the 2010 Hyundai Equus, for example. With a base price of $55,00 – $60,000, this is not targeted for folks needed a cheap drive. Watch out, Mercedes, Hyundai has your number…and they’ve got it on speed dial.

True to form, Hyundai is entering at price points well below those of like-quality competitors. The Genesis (at $38,000) is aimed at the Lexus market, while the Azera ($24,000) is going toe-to-toe with the Toyota Avalon. The only problem is that when you’re dealing with fussy and fickle upper-class consumers, it can be hard selling prestige with a discount price.

And that is the major challenge facing Hyundai today. They have recovered completely from the shoddy quality of two decades ago. Their cars will rival any Japanese model, and even many European machines. All at the tune of $10,000 – $20,000 savings.

But it is hard to establish a prestige image when your first step on our sandy beaches was with the equivalent of a Far East Yugo. Consumers have memories like elephants. Changing consumer minds can be tough when everyone remembers that you danced like Elaine.

To be fair, Hyundai didn’t get its 5% share by virtue of our charity. They have earned those stripes by continually convincing the middle market that their cars are indeed good. And I will attest to that fact, for I drive a 2000 Sonata that has made its way through my family, from my parents to my brother (who apparently forgave Hyundai’s earlier sin), and then to me. At 10 years of age, it purrs like a kitty and likes nothing more than cruising down the open road at 90. Note to the law enforcement community: I didn’t really say that.

Hyundai’s high-dollar aspirations are really no different from those of Walmart and their efforts to reach the gentrified folks with cool TVs and other electronics gear. And as we discussed recently, WM is willing to downsize stores to be able to enter high rent urban neighborhoods, places not exactly known as being in the discount zone

But cars are not socks and underwear, and comparing $60,000 cars to $5 skivvies is probably not a fair comparison. People don’t normally see our underwear (boxer waistbands and bra straps notwithstanding), but they do see our cars. And those cars are a badge emblematic of our good taste. Our financial wherewithal. Our social rung.

It will probably take a little time before Hyundai can chip away at the high-dollar market owned by Lexus, BMW, and Mercedes. But if you recall, Lexus wasn’t in the game 20 years ago either. Toyota simply chose a different route (establishing a separate brand name). But for the many current Hyundai owners, if and when they are ready to move up a notch, this won’t be a leap at all. It’ll just be a simple lane change.

Because life in the fast lane can be fun.

Dr “Going Places” Gerlich


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