The last few years have been an extraordinary ride for South Korea’s two leading brands – huge growth in both the USA and Europe, along with what turned out to be cleverly timed moves into the now rapidly expanding affordable sectors of the Chinese and Indian markets. Profits and quality have risen notably but HMC’s stated ‘luxury’ (Hyundai) and ‘sporty’ (KIA) brand values seem as far from reality now as they were when announced two years ago. The dark days of the mid to late 1990s may be well behind them now, but where exactly are Hyundai and KIA heading? Glenn Brooks reports.
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It seems amazing to think that Ford, KIA’s partner (via Mazda) for much of the early 1990s chose not to rescue the company from bankruptcy and happily watched Hyundai Motor attempt a resuscitation of its rival. KIA’s vehicles were basic, mostly cheap and often eccentric (hands up those who remember KIA’s Mentor-engined version of the Lotus Elan or even the lengthened and rebodied Mazda 929 sold as the KIA Enterprise). You would be forgiven for thinking, as Ford did, that KIA was not a brand that had a lot of equity in it. Or perhaps that it posed no threat in export markets so didn’t need to be neutralised.
Today, it’s a different story. HMC left the model range it inherited pretty much intact but laid out plans to integrate KIA’s model lines into common Hyundai/KIA components sets. Where there are now KIA-only platforms, these are either old vehicles living out their last months or else produced so cheaply in China and India that a new HMC platform is not yet needed. The Morning, known as the Picanto in Europe, has been a smash hit and battles fiercely with Fiat’s excellent Panda in southern and central markets, while an older small car platform is deemed good enough for KIAs and Hyundais built and sold in developing markets.
Another big seller in Europe is the Sorento – an SUV that, shiny mock-timber interior ‘highlights’ aside, manages to be almost everything that many family buyers have been looking for – a roomy, compact and good looking four by four that doesn’t cost the earth nor attract the attentions of the anti-SUV brigade. Admittedly, its big brother the Hyundai Terracan has been somewhat less of a success but that’s not the point – the Sorento exploited a huge niche that was waiting to be found and one that every European mass maker failed to see.
The Hyundai brand, meanwhile has got big plans in the USA. The new Entourage that will go on sale there next April is a bold statement indeed from what was once the maker of unreliable and badly-built compact cars. Boasting a standard 3.8 litre V6 and to be available in long-wheelbase form only, Hyundai’s first full-size minivan will hit the market just as Honda and the Chrysler Group’s big-selling minivans start to reach middle age. What’s more, by basing the Entourage on the architecture of the NF Sonata, production could surely be added to HMC’s new Montgomery plant if sales start to take off. And surely this writer is not the only one to have noticed how Hyundai and KIA have begun to lift themselves away from the cheap end of the market. We don’t hear about too many recalls involving these brands anymore, either.
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By GlobalDataAs for shared architectures, the days when Hyundai and KIA could count 24 different platforms between them are long gone and, worryingly for rivals, the tally is still falling as old models are phased out and new vehicles come on stream. The latest Sonata is not only a vastly better car than its former self but the rebodied variants of it are still being released: so far we’ve seen the NF Sonata, Grandeur/Azera and VQ/Entourage, with the KIA Carnival/Sedona and Optima/Magentis replacements on the way, along with new versions of the Hyundai Dynasty and Santa Fe. Big cars all sharing one low-cost platform means decent-sized profits when you’re a maker as efficient as HMC. And by basing most of its small and medium-sized hatchbacks and minivans on the one ‘MC’ components set and phasing out several obsolete architectures such as the Click and Avante platforms, HMC is setting an example that not even Toyota is yet to match. By the end of this decade, it is entirely possible that Hyundai and KIA will have a model range stretching from minicars to luxury saloons that uses only three platforms.
So much for what HMC is up to in the rich world, what about the big volume/low price markets? Both brands have seen that buyers in China and India (for now) are not too worried about having the latest technology so long as the price is dirt cheap – witness how the KIA Visto-based (circa mid 1990s) Hyundai Santro Xing has bitten huge chunks out of Maruti-Suzuki’s small car market share. Hyundai is also using India as its base for high-quality but low-cost exports to Mexico, Africa and southern Europe. In the booming Turkish market, it’s a slightly different story. HMC has recently invested in light van and 3.5 tonne truck production and tellingly, doubled its car production capacity at a plant that now churns out 60,000 Hyundai Vernas and Avantes a year. You can be sure that as tastes change and consumer buying power improves, HMC will move quickly towards assembly of its latest products.
In China, it’s been the turn of HMC’s other brand to play aggressive interloper, with the Dongfeng-Yueda-KIA Qianlima a best-seller thanks to the same strategy that has worked so well for the Sorento in Europe: larger than class-average size combined with less than class average prices. And for the moment, no-one seems fussed about its 1994 Hyundai Accent underpinnings. Should sales start to falter, HMC won’t mind too much – it is hoping that buyers will graduate more and more to the larger and more profitable models it now builds in China: the Optima, Carnival, Sonata, Cerato, Tucson and Elantra.
There is another vehicle that Hyundai sells in China and, tellingly, it recently changed the model name to ‘Equus’ from ‘Centennial’. If the rumours of Hyundai using Equus as the name of its forthcoming (2007) luxury brand prove true, it will no doubt be launched in China soon after the first two markets, South Korea and the USA. A new rear- and all-wheel drive platform is being developed for Equus, with the first vehicles expected to be a large saloon to replace Hyundai’s current front-wheel drive V6 and V8-powered flagship, as well as a large coupé to compete with the Infiniti G35. Hyundai has cleverly realised that the current Tiburon/Tuscani needs to evolve into a sportier and more expensive car now that Ford has reclaimed old territory with the hot-selling and power-laden Mustang.
What else might a still profit-hungry HMC Group seek to do with a large rear-drive platform? The obvious answer would be a full-sized pickup truck. Already, there have been strong hints that the KIA brand, at least, might launch just such a vehicle. Witness the Mojave concept from last year’s Chicago auto show. While its 280hp 3.8 litre V6 might have been on the small side, there was nothing compact about its 3.3 metre long wheelbase. Tone down the styling, insert Hyundai’s existing 4.5 litre V8, commence build in Montgomery (or a future Mexican plant) and suddenly you’ve got a lower-priced and deadly serious rival for Toyota’s Tundra II and Nissan’s Titan, not to mention GM, Ford and Dodge’s money-spinning truck lines.
The parallels with other high-profit mass makers are striking: think of Toyota-Daihatsu and Peugeot-Citroen. Indeed, HMC seems to have borrowed PSA’s trick of launching one platform with a new model for one brand, facelifting it after a few years and then launching a rival model for the other brand around the same time. There is one important difference: shorter lifecycles and much higher quality with each renewal. The strategy is proving to be a winning one and HMC has learned how to be big and profitable far quicker than Toyota did. And with its strategy of targeting younger buyers then following them up the age and income ladder worldwide, HMC looks set to be the Toyota of tomorrow.
Glenn Brooks
