Korea Makes Its Entry Into U.S. Car Market : Early Sales of Hyundai Strong, Company Says
“Drive out in a better car than you paid for,” the sales brochures say, and that’s the strategy Hyundai Motor America, a Garden Grove subsidiary of the giant Hyundai Motor Co. in Korea, is banking on to carve out a piece of the American subcompact car market.
In 13 days of sales, the company has sold 588 of its Excel subcompacts--with a starting price of $4,995--at 75 dealerships scattered over 31 states. By the end of February, 2,053 cars had been wholesaled to dealers.
The two existing Orange County Hyundai dealerships--selected from a nationwide pool of 5,000 applicants--report lengthy waiting lists of customers who have put down $1,000 on the four-door and five-door cars, sight unseen.
“Initially, there’s been some skepticism by customers because the car’s made in Korea,” said Ron Petz, sales manager at McPherson Hyundai in Santa Ana, “until they see what they’re getting for the money.”
The three models available in the United States feature a 1.5-liter, four-cylinder engine that, along with the transmission system, is designed by Mitsubishi. Mitsubishi also owns a 15% interest in the Hyundai Motor Co. Four-speed manual transmission is standard on the basic Excel while five-speed is standard on the higher-priced Excel GL and GLS models.
In 13 days of sales, McPherson has sold 45 Excels, with an additional 30 to 40 presold.
Ray Grosso, a sales manager at Holmes Tuttle Hyundai in Irvine, said the cars are selling “as fast as they’re coming in,” with 50% of the dealership’s next shipment of 40 cars presold.
“We’re getting 200 to 300 people in here on the weekends,” Grosso said. “I foresee this happening for a while.”
It’s good news for Hyundai Motor America and its parent company, a maker of trucks, ships, rolling stock and a variety of other heavy industrial products.
With $25 million invested in print and electronic advertising, Hyundai is making a strong push to succeed in the American car market by offering a car priced $700 less than other cars in the subcompact range and half the cost of the average new car sold in the United States. Hyundai’s fully equipped GLS sedan sells for $6,545--$1,500 less than the price of other comparably equipped sedans.
“This is the largest and most competitive auto market in the world, and we’re here for the long run,” Hyundai spokesman Bruce Matthias said. “We didn’t stockpile $15 million in replacement parts just for the fun of it.”
Hyundai hopes to have 200 dealerships in operation on the West Coast, East Coast and in the South by the end of the year. It plans to tackle the Midwest market last.
There are six operating dealerships in the greater Southern California area: two in Orange County, two in Los Angeles County, one in San Diego and the other in Riverside. Twelve more dealerships are under construction in the area, including two more in Orange County. Hyundai required that all dealerships complete their facilities, including a complete service department, before the company would deliver any cars, an unpopular but necessary policy, Matthias said.
“Say Chevrolet gives a new franchise to a fellow and he opens a store,” Matthias said. “It’s not critical that he have a full-service center set up because there’s another Chevy dealer nearby. In our case, there isn’t another Hyundai dealer around the corner.”
Hyundai introduced its auto line in Canada three years ago, Matthias said, and has become the best-selling import there, outselling Toyota and Nissan.
In the United States, Matthias said, the company views its major competition as the used car market. With the average used car selling for a little more than $5,000, Matthias said consumers now have a choice of buying a 2- or 3-year-old subcompact or buying a new Hyundai.
Although the Yugo, a Yugoslav subcompact introduced on the East Coast in 1984, has Hyundai’s base price beaten by $1,000, Michael Luckey, senior automotive analyst for Shearson Lehman in New York, said that the “Yugo is more of a question mark because of the Spartan-like nature of the vehicle. The car has sold well, but the question is, is it going to be a lasting influence in the marketplace? Outside analysts seem more positive about the long-term prospects of Hyundai.”
Luckey also cites Hyundai Motor America’s management team as a plus for the company. Max Jamiessen, Hyundai’s chief operating officer, and three of his senior vice presidents are alumni of Toyota, Luckey said, so “presumably the learning curve and start-up costs should be much less with the experienced people they’ve got.”
Overall, Matthias said, between 20% and 30% of the employees at Hyundai’s corporate headquarters in Garden Grove come from Toyota.
By 1987, the company hopes to expand its dealerships to all of the 48 contiguous states. Although Matthias said it is too early to tell from just two weeks of sales, Luckey said he expects the company to meet its projected sales of 100,000 cars during its first year. Toyota, for example, sold 900,000 cars in the United States in 1985.
“It’s tough to project,” Matthias said. “We feel there is a strong market for an entry-level subcompact car and we’re comfortable that we’re going to be able to meet a real need in the marketplace.”
