Hyundai has begun a major marketing push in the United States with increased sales and the weakening Korean won.
U.S. car sales plunged to a 27-year low in January, dragging down Detroit’s Shrunken Three and even mighty Toyota Motor (TM). But one automaker has bucked the trend: Hyundai Motor. The Korean company, whose name was once synonymous with cheap, logged a 14% sales gain in what was a dismal month for almost every other carmaker.
It’s too soon to say whether that marks the start of a trend that could see Hyundai emerge from the shadow of its larger Japanese rivals, Toyota and Honda Motor (HMC). For one thing, the jump owes much to Hyundai’s 22% drop in sales in January 2008. And the company has piled on the discounts. Incentives on its Sonata sedan, Santa Fe SUV, and other models average $2,611 per vehicle—about triple those of a year ago. Faced with bloated inventory at its single U.S. factory in Montgomery, Ala., Hyundai has scaled back production there and is unloading cars on rental-car agencies: Nearly 30% of the 24,500 vehicles it sold in January went to such fleet buyers at virtually no profit.
Hyundai can afford to sell its cars on the cheap, at least for a while. Its balance sheet is far healthier than those of its Detroit peers. And it’s getting a big lift from the weak won. The Korean currency has dropped by nearly a third against the dollar in the past year, so Hyundai pockets more cash from each car it sells in the U.S. Toyota and Honda, on the other hand, are seeing their earnings wiped out by a yen that is hovering at a 13-year high. Brokerage Korea Investment & Securities figures more than half of Hyundai’s projected $1.5 billion profit in 2009 will come from the favorable exchange rate. “The currency swing has been a godsend for Hyundai,” says Park Kyung Min, chief executive of Seoul fund manager Hangaram Investment Management.
As the other auto companies have reigned in advertising, Hyundai is devoting ore resources to marketing, evn buying ads during the Super Bowl and the Academy Awards.
