Raw Japan

Slices of Japanese business, politics and life

Car Wars: Hyundai climbs with Toyota’s model

November 17, 2009

HYUNDAI/

As a child in the early ’80s, I remember spending a summer in Seoul and taking a trip with relatives to the countryside in a Hyundai Pony, South Korea’s first homegrown car. I spoke no Korean, but learned one word quickly enough: “lemon”.

Hyundai Motor has certainly come a long way since then.

Thirty-four years after introducing the Pony hatchback at the Turin Motor Show, Hyundai is the world’s fourth-largest carmaker, surpassing Ford Motor in the first half of this year. With the rest of the industry reeling from slumping sales, Hyundai’s charge has been especially conspicuous this year as it grabbed market share across the world and even made record profits in the latest quarter.

As my colleague Cheon Jong-woo and I wrote last week, Hyundai’s rise is making Japanese rivals nervous.

While Hyundai’s mounting success, founded on offering quality products at cheaper prices, has been in the cards for a while now, there are two new factors that worry the Japanese: a strong yen, coupled with the new government’s apparenUSA/t indifference towards it, and South Korea’s progress in sealing free trade pacts.

“I think there’s a sense of crisis in the whole (Japanese) industry,” top Nissan Motor executive Toshiyuki Shiga said recently. “Whether you take the FTAs (free trade agreements) or foreign exchange policy, I get the impression that South Korea is tackling things well.”

But if anybody is feeling the most pressure, it might be Toyota Motor, the world’s biggest carmaker.

Several years ago, when I asked a top executive at Toyota’s U.S. operations about the South Korean automaker’s rising fortunes, he responded point blank that Hyundai was one of his biggest concerns.

TOYOTA/MAZDA

Honda and Nissan are also formidable rivals, but they have a distinct business approach and profile from us,” Yukitoshi Funo, now executive vice president at Toyota, had said. ”Hyundai, meanwhile, is essentially doing what we’re doing.”

Funo said then that rather than competing on prices, Toyota would have to focus on “brand and value”.

On that front, Toyota is still a head above the rest. Interbrand valued Toyota’s brand at $31.3 billion this year, nearly seven times that of Hyundai’s, which ranked eighth among carmakers.

To be sure, Hyundai has a long way to catch up to Toyota and Honda on fundamental, longer-term strength. But with a role model like Toyota and a more supportive government, it’s certain to keep rivals on their toes.

Photo credits: John Gress/REUTERS; Jo Yong hak/REUTERS; Yuriko Nakao/REUTERS

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