Hyundai Continues to Grow at Explosive Rate

Just when Detroit’s recuperating automakers were beginning to feel confident about finally competing successfully against Asian rivals Honda. and Toyota, John Krafcik came to town on Wednesday to cut them back down to size.

While General Motors, Ford, and Chrysler have made incredible progress this past year, Korean automaker Hyundai continues to grow at a blistering rate as the hottest auto company in the world.

In remarks delivered at the annual Management Briefing Seminars, Krafcik, Hyundai Motor America’s president, shared the intimidating details of the carmaker’s ten-year growth spurt:

• In 2001, Hyundai was 32nd of 37 international auto brands in the J.D. Power Initial Quality Study. Only three years later, Hyundai ranked seventh, and now it places in the top three non-premium car brands.
• In worldwide sales, Hyundai skyrocketed from 11th in 1999 to sixth in 2005 and to fourth in 2009, surpassed only by Toyota, General Motors, and Volkswagen. In the United States, Hyundai’s market share has grown from one percent ten years ago to five percent as of July 2010.
• Hardly recognized at a national level in the beginning of the 21st century, the carmaker now has massive advertisement placements during the Super Bowl and Academy Award broadcasts.

Colossal Sales Gains

The continuing success of Hyundai does not impugn the achievements of the Detroit Three in the last two years. Chrysler and General Motors, with the assistance of federal bailouts and bankruptcies, have eliminated a $2,000-per-vehicle cost gap with their primary foreign competitors. And Ford has begun steadily rebuilding market share and sales after a protracted slump.

Last month, Ford and GM experienced sales increases of 3 percent and 5 percent, respectively, while Honda and Toyota saw declines of 2 percent and 3 percent.

By contrast, Hyundai posted a 19-percent gain for July, and its U.S. auto sales are up by 24 percent in 2010. Excluding sales to rental car companies and corporate fleets, the midsize Hyundai Sonata sedan is now a leader in its segment, along with the Ford Fusion, Toyota Camry, Chevrolet Malibu, Honda Accord, and Nissan Altima.

Moreover, Krafcik added in an interview, the Sonata commanded a higher average transaction price in June nationwide than the Honda Accord.

The K-Mart Cautionary Tale

No one can say what the future holds for Hyundai, but its meteoric rise is an admonition to be aware of what lurks in the rearview mirror.

The ultimate cautionary tale is the possibly similar experience retail giant Kmart had.

In the eighties, the discount chain enjoyed explosive growth, intent on surpassing Sears, which reigned supreme as the country’s best-selling retailer for years.

But just as Kmart finally outstripped Sears in 1991, Sam Walton’s Arkansas-based monster, Walmart, blew both retailers out of the water. Ten years later, Kmart declared bankruptcy and became part of Sears.

What lies ahead for Hyundai remains to be seen. Depending on its future strategies, the automaker could become the Kmart has-been or the Walmart juggernaut of the automotive industry.