Hyundai Motors Struggling in U.S.

The atmosphere at Cormier Hyundai, a car dealership located on the outskirts of Los Angeles, on the afternoon of February 1 was gloomy.

Sonata and Santa Fe models manufactured in the Alabama factory in the U.S., and Grandeur and Avante models (exported under the names Azera and Elantra) were displayed. But there were no customers anywhere in sight.

A salesman said, “The number of customers has shrunk by 20 to 30 percent.”

The view is not all that different at “Planet Hyundai” – a dealership located on Sahara Street in Las Vegas in the afternoon of February 3. There were hardly any customers.

Hyundai Motors’ automobiles are cheap and their quality has been climbing. They are not doing well in the U.S. market, however.

Monthly sales have been downward from last July when 47,205 cars were sold in the U.S., except for December, the year-end blowout sale season. In this January, the number fell by 41 percent to 27,721 cars in just six months. Hyundai’s market share in the U.S. plummeted from 3.2 percent last July to 2.6 percent this January.

Shunned in the used-car market-

Arnold Schmitt, a hotel employee, is bargaining with a salesman on a Sonata 2.4 at the Planet Hyundai in Las Vegas. This car would be sold at 2.7 million won in Korea, and the recommended price is 20,600 dollars (approximately 19.36 million won). But the salesman immediately gives Mr. Schmitt a 1,600-dollar discount and suggested 19,000 dollars (approximately 17.86 million won) for the car. This is about 66 percent of the price Koreans would pay for the same model. But Mr. Schmitt says he will think about it and does not take the offer.

Hyundai Motors offers one of the most attractive after-service contracts. The after-service is free for 10 years and 100,000 miles (160,000 km). The company spends three times more on marketing in the U.S. compared to Korea.

Sales are still flat. An employee of Hyundai Motors says, “The units sold in the U.S. do not have the options that the cars sold in Korea have. Tax is about 16 percent higher in Korea. This makes up for the difference in price.” In reality, though, this hardly bridges the gap.

The situation is starkly different at a Toyota dealership just 500 meters away from Planet Hyundai. The Toyota Camry 2.4 is going for the full price of $23,000 (approximately 21.62 million won). Seven customers are eyeing the cars.

“We once sold more than 300 cars a month. These days we barely sell half that number,” laments John Peterson, a representative of Cormier Hyundai. “Things will be even worse if a strike in Korea stops car export. Customers will lose their trust in Hyundai.”

Poor design, low brand recognition-

At Hyundai Motors America located in the suburbs of Los Angeles on February 1, employees were huddled in a strategy meeting. The firm’s monthly sales figures had fallen 8.2 percent compared to the month before.

The 25 Hyundai Motors employees dispatched from Korea are working day and night, but the solution seems nowhere in sight.

One employee stationed in the U.S. said, “Many market research agencies tout the growing quality and safety of Hyundai cars, but the figures are getting worse and worse.”

mobidic@donga.com