136-From Cheap to Chic

Do you know what a Hyundai is? How about a Kia? Of course you do. They are South Korean automakers. Though they are not top of the consumer mind in the U.S., they are a rising pair. They both belong to the Hyundai-Kia Automotive Group. Globally, this automotive group is the fourth largest automaker. Toyota, General Motors and Volkswagen rank ahead of them. And the South Korean Group is gaining share at a rapid rate. Ten years ago it was the eleventh largest global automaker.

In the United States, Hyundai and Kia began life as Price Leaders. They produced small, cheap cars with relatively low quality. Twenty years ago, these manufacturers’ cars might have been a close substitute with a used car. Not so any more.

Hyundai has become better known with its 100,000 mile warranty, the best in the auto business. The company realized its poor quality reputation was holding it back and invested to improve quality. To convince the U.S. consumer that it was serious, it offered the best warranty in the business.

Hyundai is no longer simply a Price Leader. It has become a true Standard Leader. It has migrated up through the Standard Leader product class, with the Sonata, and has even entered the lower end of the Performance Leader class with the new Genesis. All of the company’s offerings, though, carry lower prices than those of competition.

The combination of low prices and good quality has propelled Hyundai, even in the hostile auto industry. Hyundai sales in the last year grew by 47%, while industry sales were up only 1%.

Hyundai is a good example of a Price Leader who morphs into a Standard Leader over time by offering good performance for a low price. (For more information on the four price points, visit the Diagnose/Products and Services section of StrategyStreet.) Most Price Leaders don’t try to do this, but a few carry it off with aplomb. Hyundai is one of them.

Posted 9/28/09

Update:

The two Korean manufacturers have been a true success story continuing into 2022.  They have grown on their broad product lines (a Function innovation to avoid failure for some customers) and superb reputation for Reliability.  Hyundai’s US market share has grown from 3% in 2008 to about 5% at the end of 2021. During the same period, Kia’s share has grown from 2% to 4.5% of the US market.

The two major Korean automobile manufacturers have now become Standard Leaders in the US automobile market. They offer a wide range of products from Price Leaders to Performance Leaders in the US market. The broad product line and growing reputation for quality are yielding market share gains for these Korean manufacturers.

Genesis is the luxury vehicle division of the South Korean vehicle manufacturer, Hyundai.  The brand was introduced in 2015 and entered the US market in late 2016, with the G80 and G 90 models.  The G 70 model entered the market in 2017.  All 3 Genesis models garner impressive reviews and offer outstanding value for money.  The warranty coverage on Genesis automobiles parallels that of Hyundai and Kia.  They are clearly the best warranties in the American automobile market.  Beginning in 2017, the company’s Genesis US market share has grown slowly from .12% to .33% in 2021.

While the US based auto manufacturers struggled, their Asian counterparts continued to gain share.  As other competitors, particularly the Koreans with their strong Reliability reputation, have grown their market shares with high quality products, Toyota’s US market share has stagnated.  In 2008, Toyota’s US market share was 14%.  By the end of 2021 its market share was 12.75%.  In 2020, Toyota still led the global market with a share of 8.5%.  Volkswagen followed at 7.8%.  Hyundai was 3rd at 5.4%.  Ford was 4th at 5.1% and Honda was 5th at 4.8%.

These Korean automobile manufacturers built their reputation for Reliability originally in their Price Leader products. They rode that reputation for quality to produce both Standard Leader and Performance Leader products and appeal to a wider range of customers. See HERE for more explanation.

8/22

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THE SOURCES FOR STRATEGYSTREET.COM: For over 30 years we observed the evolution of more than 100 industries, many hostile.  We put their facts into frameworks applicable to all industries and found patterns.  Strategystreet.com describes the inductive results of these thousands of observations and their patterns.