Why companies do the things they do? Who knows. Unless you are present at the meetings or happen to have a leaker within, it is a rather tough nut to crack. However, I am developing a theory. You be the judge.
First time I came across Hyundai as a car company it was 1992. I was 18, mummy was going to buy me a car, and thus sent me on my way to find what could, within reason, be purchased for the constant disappointment I had become.
The FIAT Tipo was a contender, the Ford Fiesta was another one, the VW Polo made an appearance and, finally, a new Korean company was making headway into the European market by offering a quirky 3-valve per cylinder car named Accent.
Whereas 80bhp was the norm on the segment I was considering, the Accent offered 102bhp. 3 doors were 5 on the Korean. Boot capacity was larger, interior was better and the radio offered 6 speakers instead of 4. And it was a Blaupunkt. Plus, it was about 600 of today’s Euros cheaper than the next competitor, the Ford Fiesta. In other words, a no-brainer.
Alas, dad made an appearance, said that Hyundai was a new brand on the market and though clearly better on paper, maintenance and spare parts might become an issue. Therefore, the Fiesta was the way to go.
Unsaid went the clear assessment that, inevitably, I was going to crash the car at some point and that he wouldn’t, under any circumstance, be forced to drive me anywhere if he could avoid it. Long in short, I did crash the car, but that was 4 years later and it certainly is another story.
So, in a market where protectionism was hampering the Japanese invasion, and where the oil crisis made automatic American gas guzzlers an imposition on the wallet, this little Korean brand was hedging bets in Europe, the cradle of automotive technology, and home of the inventor of the car, Mr. Daimler-Benz (yes, two people).
Twenty-five years later and Hyundai is now the 4th car manufacturer in the world and, up until very recently, their market focus was one of matching quality levels to Japanese, and be that 5 to 10% cheaper than the equivalent rival. Not imaginative but a certainly tried and true strategy.
Until very recently, I said. Because it seems that they are upgrading their game quite a bit, with the Accent and Elantra still being the car of choice for the bargain hunter, the models they are launching now are poised to attract a completely new market. That of the middle income, discerning, and quality-oriented driver.
Take the new i30. A VW Golf sized hatchback that offers pretty good interiors, contained fuel consumption and most of the frills available on any car of that segment. Plus, they also make the i30 N, which with 272bhp is hot hatch extraordinaire.
Or the new Azera, a full-size sedan that competes toe-to-toe with the Passat, the Avalon, the Accord or the Altima. It even shares the “A” on the name. Coincidence? I don’t think so.
And now, the Kona, the newest Urban Crossover that is a testament to the new design language imparted, largely, by Peter Schreyer, who did the original TT in Audi.
But why?
The answer, I believe, is China. But not the way you think. While our mental picture of the Dragon Giant is a conglomerate of heavy industries that expel tons of pollution and occupy the cheapest ever manpower, the reality is very different.
For the past ten years, the Chinese government has been pushing on its own industrial complex to go the way of automation, lean manufacturing, quality, technological development and, yes, mass production.
As a sign of this, robotics manufacturer KUKA increased sales to China by 300% during the worst years of the latest economic meltdown. ABB, Motoman, Staubli and Fanuc also post strong growth in this market where everywhere else companies were struggling to stay afloat.
Add to that the attraction of foreign investment, albeit in an extremely protective way, the understanding of the ancillary industries the car brings to the table and the nascent Chinese middle class and we find ourselves buying Chinese owned Volvos and considering the new MG GS.
And that’s the crux Hyundai have seen themselves in. With the arrival of BYD, JAC, BAEC, Geely or Chery, the space they occupied was going to become extremely crowded. And taking into account that 40% of Hyundai sales are fleet cars, sold to companies with no emotions and an eye for the bottom line, being just a bit cheaper than Toyota was no place to be. Add to that a weak Yen, a strong Won and an invariable Yuan, and their position could have become untenable.
Hence, Hyundai has done three things:
First, a constant upgrade of their models. On average, brands renovate their models every seven years. Hyundai varies between 5 and 6, giving them a sizeable advantage on innovation. Albeit an expensive one.
Second, increase brand range. Where VW could merge with Audi, Porsche and Lamborghini, and thus expand the segments they covered, Hyundai had a much harder out. They could not absorb any Japanese manufacturer because they compete on every industry, be it the manufacturing of robots, construction, ship building or cars. European brands were all sold, expensive or unattractive and the Americans are probably protected against foreign ownership by defense contract laws. Thus they launched Genesis a couple of years ago, and now they are launching the N-badge, which is, funny enough, right next to M-badge some other Bavarian manufacturer has.
And Third, attract the talent that will open the doors to “discerning and cultured” markets. Which they have done with the aforementioned Peter Schreyer and Luc Donckerwolke, who did the Lamborghini Gallardo, among others, for VW.
We will see whether this strategy works in the long run, although after testing a fair share of their models, I must say they are fantastic. Quality and performance seems equivalent to more prestigious brands although still with a patina of quirky details that may seem puzzling to western cultures. Like the little jingle every time you start or stop the car, the fiddly radio that does not remember settings or the greetings the screens regale you with every morning. But fantastic overall.
In the meantime, I can only beg Hyundai to bring the Kona, the i30 N and the plug-in Ioniq to the Middle East. I want to drive them.
