Hyundai turns brand-conscious

[Viceroymenthol]

http://www.businesstimes.com.sg/archive/we...brand-conscious

 

Published April 11, 2012

 

HYUNDAI

 

Hyundai turns brand-conscious

 

Korean carmaker sparing no expense to shed old image and move upmarket and create a luxury halo around its name

 

Life in the fast lane: Hyundai wants its cars to be valued as something like Apple's iPhone, not Samsung's Galaxy. With its investment in design, the Korean carmarker believes new cars such as the next-generation Genesis premium sedan due to be unveiled late next year will have its rivals talking

 

- REUTERS

 

(SEOUL)

 

 

OH Kwang-teak recently spent US$310 on a haircut and beauty care at a salon in Seoul's upscale Cheongdamdong district before splashing out US$1,100 at a five-star hotel, which, if asked, will fill your bath with chocolate milk. He also visited Hermes and Cartier stores, while his wife had an expensive massage.

 

All in the name of research.

 

Mr Oh sells Hyundai Motor cars and is part of a select group of the South Korean firm's dealers tasked with seeing first-hand what makes premium service brands tick - and applying that to Hyundai cars.

 

His pampering shows how the Korean carmaker is trying to burnish a reputation for quality and banish the jibes of the past, when its Accent sub-compact as dubbed the 'Accident' and its boxy Trajet 7-seater the 'Tragic'.

 

When it started producing cars four decades ago, Hyundai had to make do with borrowed designs, engines, suspension and transmission technology.

 

Now the world's fifth-biggest carmaker, with affiliate Kia Motors, Hyundai is the envy of global rivals, outgrowing the market during a severe industry downturn by offering stylish models at affordable prices backed by savvy, if sometimes risky, promotions and helped by a cheaper currency.

 

Hyundai has invested heavily to improve design and create a luxury halo around its brand, though customers are not yet queueing up to pay more because it's a Hyundai. Profit growth is not assured and the firm is taking a measured approach in capacity and new product launches.

 

'We want our cars to be valued as something like Apple's iPhone, not Samsung's Galaxy. They give different customer satisfaction,' Sean Kim, senior vice-president of Hyundai's domestic marketing group, told Reuters at his office.

 

'We want to shed the image that Hyundai makes cheap cars. Volkswagen is a volume car maker like us, but charges 10-20 per cent more, and we want to be viewed as such a premium car maker,' said Mr Kim.

 

That's where Mr Oh's recent luxury splurge comes in.

 

'I've never been to these places before, but now I understand why consumers like to spend there. They (luxury brands) don't emphasise how expensive their products are.

 

Instead, they try to explain why they're worth it.

 

'Now I do the same thing. I focus more on explaining a car's history, its value and its strengths, rather than just talking about price,' said Mr Oh, who on average sells 10 cars a month.

 

The company, which won headlines and plaudits during the financial crisis when it said owners in the United States could return their cars for free if they lost their job within a year, is also chasing younger aspirational buyers to wrest market share from Volkswagen's Golf.

 

The canny marketing coup made Hyundai the only major carmaker to gain US market share during the downturn.

 

In the same vein, the Korean firm recently stocked its main local dealerships with premium foreign marques such as the BMW 5 Series, Mercedes Benz E-class and Lexus ES350 so consumers could test drive and compare them directly with Hyundai's own models.

 

This all fits with a track record of Hyundai making bold bets.

 

Bob Martin, a former top Hyundai US executive and now a senior consultant at product development firm The Carlab, recalled how the firm's US launch in 1986, selling just the Excel, or Pony model, exceeded all expectations.

 

'It was incredible, but (by 1988) those of us tasked to look forward were raising red flags saying, 'We've got some serious long-term problems because these cars are not living up to expectations and the quality is sub-standard'.' 'Everyone's fat, dumb and happy, and then the slide started and it became a real challenging place to work, a lot of finger pointing,' Mr Martin told Reuters.

 

'Everyone had gotten drunk on the Kool-Aid and the big annual bonuses. But the cars were falling apart.' Describing himself as the chief protagonist behind the turnaround strategy in 1997, Martin recalled how Hyundai was caught in a 'classic death spiral' with all the symptoms of 'this is going nowhere'. 'We were leading the league in incentives and still not moving the metal,' he said.

 

Finbarr O'Neill, who led Hyundai's US operations from 1998 to 2003, recalls how business, and the quality perception, were changed by a decision by autocratic top management to introduce a 10-year/100,000 mile (160,900 km) warranty in the United States.

 

'There was a lot of resistance to it, but Hyundai was looking over the precipice and couldn't sustain itself selling four models of around 90,000 units a year,' recalled Mr O'Neill, now head of influential JD Power and Associates.

 

'There was a willingness of management in Korea to take the risk. The financial types were quick to point the finger and say: 'You're going to bankrupt us.' With the eye-catching warranty programme and incremental improvements in style and quality, Hyundai revived its US sales. By last year, sales had grown seven-fold to 646,000 cars, giving Hyundai its best-ever share of the market at 5.1 per cent.

 

Hyundai chairman Chung Mong-koo is credited for leading the quality transformation since he took over in 2000.

 

'He would have monthly meetings. They were brutal. He was demanding performance. It was not good to go in there and tell him we'd failed on a quality issue,' said Mr O'Neill.

 

Mr Martin, too, recalls Mr Chung's obsession with quality.

 

Product quality

 

'There was always a mandate for quality improvement, but this guy is a fanatic about it. When he came in, product quality went from a very important initiative to 'If you're not improving product quality, you're fired at lunch.' If I had to boil it down to what are the secrets of Hyundai: No 1, you're not going to outwork the Koreans. It's indisputable. No 2, middle management is thin. The decision-making process is quick when necessary. When the chairman says, 'We're going to do this,' it's just done. It's not like Toyota where you have consensus management. Hyundai moves at lightning speed. And No 3, the chairman. When the chairman says 'You will achieve this', that's the end of the discussion,' Mr Martin said.

 

Mr Chung still chairs a quality meeting with top executives twice a month, according to quality chief Shin Myeong-ki.

 

'We do not need to build more plants. Producing eight million (vehicles a year) is sufficient,' Mr Chung recently told his senior managers, sources familiar with the matter said. 'We are already seeing signs of growing pains, and should now direct our focus on qualitative growth.'

 

At its Seoul headquarters, Hyundai runs a round-the-clock 'quality situation room', collecting reports of problems from around the world and relaying them to the relevant departments.

 

This allows Hyundai to respond with quick fixes - a failure that cost bigger Japanese rival Toyota Motor reputational damage when it was slow to react to a massive safety issue in the United States in 2009/10.

 

Behind Hyundai's rapid growth also lies government support in keeping the Korean won relatively cheap and insulating the domestic car market from foreign imports.

 

Four of every five cars sold in Korea are Hyundai or Kia, leaving foreign brands with just a 10 per cent share to fight over. But that share was less than one per cent in 2000 - a warning sign for Hyundai/Kia and Korea's other smaller carmakers.

 

Overseas sales now account for 83 per cent of Hyundai's total, up from 54 per cent in 2000 - a period that has seen the Korean won weaken by just 3 per cent, while the yen has strengthened by nearly a third, hitting rivals Toyota, Nissan Motor and Honda Motor.

 

Whenever Mr Chung, 74, travels abroad he is usually seen off at the airport by his son Chung Eui-sun, Hyundai Motor vice-chairman, in a Confucian show of respect to parents.

 

At some stage it will be the younger Chung - Eui-sun is 41 - who will be tasked with ensuring Hyundai's renaissance is a longer-term success story - a tough ask at a time when Chinese carmakers are the 'new Hyundai' of old - replicating its success in being competitive through cheap labour, an undervalued currency and government support for local car manufacturers.

 

'The same thing could happen to them. It's a wave, a cycle. The Japanese had their successful run and, before that, the Americans,' said Nissan's chief creative officer Shiro Nakamura.

 

Those working at Hyundai and former executives say the junior Chung is a details man, and will continue the mix of autocratic family ownership and professional management.

 

'He's a very patient listener, tenacious, and he has a real insight into the car business,' said one executive, who didn't want to be named. 'He points out things that executives, often with two decades in the industry, failed to notice.' Hyundai, which a decade ago resorted to filling its booths at international motor shows with its own staff to make it seem busy, had a 10.4 per cent operating margin last year, the highest among the global top-five carmakers and topped only by premium carmaker BMW, which had 11.7 per cent.

 

Rivals are equally impressed and puzzled by its success.

 

Checking out a Hyundai model at last September's Frankfurt Motor Show, Volkswagen CEO Martin Winterkorn was caught on film checking the steering wheel adjustment, and saying: 'Nothing rattles. Why can they do it? BMW can't. We can't.' The YouTube clip has had more than 1.7 million hits.

 

In February, Hyundai's senior managers were summoned to something akin to a secret chamber in the headquarters complex - a spacious first-floor corner room that has no obvious door but which opens at the pull of a ring-shaped knob.

 

Inside, they were asked to evaluate the design of the next-generation Genesis premium sedan due to be unveiled late next year. To help them gauge its merits, it was parked alongside competing BMW, Mercedes-Benz and Audi models, said one of those taking part.

 

'The style is so different from what we've seen so far. I've never seen BMW looking so shabby,' a Hyundai executive who saw the design said, asking not to be identified as he is not authorised to talk to the media.

 

Hyundai's investment in design has its rivals talking.

 

Focus on design

 

'(Hyundai) gave a lot of power to the design chief and threw resources at it,' said Honda's creative director Toshinobu Minami. 'Everything was done for design. Hyundai and Kia steered the company with the view that the whole company needed to focus on design with a 10-year view. Until then, it was about cost.'

 

Hyundai poached ex-BMW designer Christopher Chapman to head its US design centre, while Kia hired Peter Schreyer, a former Volkswagen/Audi designer.

 

'To be honest, I don't pay much attention to the Japanese any more. It's the Koreans, and nowadays also General Motors and Ford that we look at,' said Mr Nakamura, chief creative officer at Nissan, likely this year to be Japan's most profitable carmaker.

 

One top executive at a rival carmaker, though, has dubbed Hyundai's costly design drive as 'maximum design, minimum investment'.

 

A quick look at major carmakers' annual reports shows Hyundai spent 1.9 per cent of revenue on research and development last year, versus more than 5 per cent at both VW and BMW.

 

Critics say Hyundai's aggressive design push has split customers and risks driving away as many as it attracts - not a recipe for big volume sales.

 

'If you look at the No 1 reason someone buys a Sonata, it's styling. If you look at the No 1 reason someone rejects a Sonata, it's styling,' said Toyota Motor Sales USA president Jim Lentz. 'It's very polarising, and polarising is good if you want to sell a certain volume of product.'

 

The re-styling of the Sonata, critics say, will not bring the sales volumes of Toyota's Camry or Corolla, or Honda's Accord or Civic. Style-wise, the Camry is seen as safe, dull and plain-vanilla, yet it's America's best-seller.

 

'The Sonata and Elantra need to be the 300,000 unit plus vehicles that they can be. When they do that, they'll be within reach of the one million mark in the US,' said Mr O'Neill.

 

Oh Suk-geun, head of Hyundai Design Centre, said the company needed a strong design message to stand apart from the pack.

 

'In the past (our designs) were so quiet that people weren't able to understand what we were trying to convey. Now they say our design is 'talkative' - we speak aloud and everyone recognises our design identity,' he told Reuters.

 

But the push to premium hasn't won everyone over.

 

One businessman in Seoul who drives a BMW 520D and gave only his surname, Suh, said Hyundai cars were expensive, and raising prices was just a way to make customers think they were making premium cars. 'There's a limit to the Hyundai brand.' 'Even if it's a premium car, it's still a Hyundai.' - Reuters

[Eng40765]

Hyundai image used to be cheap, not so good never mind, now its cheap and ok good.

 

To shed cheap image altogether, they will have to price higher based on better designs, no good for consumers.......like what the japs are pricing now.....have to buy chinese from now on.........

[Proton_neutron]

No. They don't have to get into the premium market. They can with the Genesis (competes with 5-Series and likes), Santa Fe Sports (7-seater replacement for the Veracruz SUV) and Equus (S-Class rival), but don't do it for mainstream cars such as the Sonata, Elantra, i30.....

 

Hyundai has done well with making mainstream cars the talk of the town with superb design, superb quality, superb reliability, superb engineering. They should continue doing so, and make people realise that driving mainstream cars ain't bad afterall.

 

Luxury cars/ brands cost a premium because they can. So unless Hyundai comes out with their luxury brand name, they should still seriously just focus on mainstream family cars, and make them more exciting.

 

Style sells these days too.

[Eng40765]

Lets hope so, keep their B&B car cheap so that consumer has more choice. But with this announcement, in order to shed cheap image, we can expect korean cars to slowly be price up......

 

All businesses will look at improving margin, now is the time for the koreans. To improve margin, they must shed change image, with this cheap image no one would buy korean if its same price as the Jap, would you?

[Friendstar]

The Koreans are moving towards the right direction all the time.

 

Same as the Germans.

 

Jap leh? Sigh

[Ooosh]

The new 2012 KIA C'eed which should be available in the UK has the following features

 

1) Double-Clutch gearbox

2) 6-spd transmission

3) 135 BHP fuel injected from a puny 1.6L car.... (No turbo here)

4) Active Eco System which manages the air conditioning compressor and alternator to gave gas mileage.

 

Can you find any of the above in Japanese B&B makes? The most give you Bluetooth connectivity and paddle shift and design still cant overtake 2006 civic...

 

And they have 5 year warrranty.

 

Not sure about the reliability but if they make it mainstream it has to be able to withstand some punishment.....

Edited April 18, 2012 by Ooosh

[Proton_neutron]

Lets hope so, keep their B&B car cheap so that consumer has more choice. But with this announcement, in order to shed cheap image, we can expect korean cars to slowly be price up......

 

All businesses will look at improving margin, now is the time for the koreans. To improve margin, they must shed change image, with this cheap image no one would buy korean if its same price as the Jap, would you?

 

 

 

The whole world would, actually. Hyundai-Kia sales figures have been rising.

Their cars are actually increasing in prices to be almost the same as the Japanese in USA and Europe. Yet people buy them by the flock.

 

People are willing to pay for design. That's one thing to help improve the brand's perceived image =D

[Heartbreakid]

Turning to brand conscious is one thing. But hope in the process they neglect quality that would last... Sometimes, focus in making one part success, the other would be sacrifice...

[Altivo]

I'm in Manila now. Saw a genenis while on the way to office

[13177]

Turning to brand conscious is one thing. But hope in the process they neglect quality that would last... Sometimes, focus in making one part success, the other would be sacrifice...

I find no matter how hyundai turns brand-conscious, in sg hyundai afterall still view as "cheap" korea cars by many people. Although the design and technology of hyundai cars improved a lot, but dont know the quality that would last got improve or not?! Example if someone plans to buy a car and drive for 10 years or beyond, i would think many people would not recommend a korea car?! In many people view, korea car is only good to drive 4-5 years?!

[Proton_neutron]

No leah.

 

There're still quite a number of Sonata EF and previous gen in USA, still running alright. Haha.

 

As long as you go for regular servicing, these cars can easily last more than 10yrs one.

The roads in other countries (including USA), aren't well maintained. But I don't see their cars suffering from unbalanced suspension, or damages to the chassis.....

 

 

[Expertz]

The Koreans are moving towards the right direction all the time.

 

Same as the Germans.

 

Jap leh? Sigh

 

still got vtec! lol

[13177]

No leah.

 

There're still quite a number of Sonata EF and previous gen in USA, still running alright. Haha.

 

As long as you go for regular servicing, these cars can easily last more than 10yrs one.

The roads in other countries (including USA), aren't well maintained. But I don't see their cars suffering from unbalanced suspension, or damages to the chassis.....

In other countries common to find many cars regardless what make/model running on the road past 10 years. But in sg you dont find many esp korea cars. I also dont understand why?

[Babyt]

jap going hybrid mah.

[Clarencetey]

Hyundai Genesis Prada edition.Branded enough?

 

http://blog.caranddriver.com/hyundai-debut...e-not-included/

[Vhtfhwlego]

Hyundai Genesis Prada edition.Branded enough?

 

http://blog.caranddriver.com/hyundai-debut...e-not-included/

Will it deperciate faster than it accelerate?

 

Need a cycle to change things around & it is hard to break thru established markets.

[Tonyg]

 

The slant "H" trying hard to beat the straight "H"

[13177]

Dont think the slant "H" can beat the straight "H", even slant "H" has improved. Cause the straight "H" has been rooted deep inside people mindset that straight "H" is always better and good.