When the latest J.D. Power and Associates quality survey came out Monday, the
big news was Hyundai's trouncing of quality stalwarts Honda and
Toyota.
The Korea-based automaker was the highest-ranked non-premium nameplate in the
study, beating such notables as Mercedes-Benz, Ford Motor ( F - news - people
), Honda ( HMC - news - people
) and Toyota ( TM - news - people
). It received the fourth-highest rank overall behind Lexus, Porsche ( PSEPF.PK - news - people ) and Cadillac.
Surprised? John Krafcik isn't. The president and
chief executive of the South Korea-based automaker's U.S. unit, he says
Hyundai's top rank simply reflects what he's known for the past few years. "Our
cars research really well ... and when you finally get in the car and drive it,
it stands up to that research."
With the American auto industry
in shambles, Hyundai has stood out as one of the few automakers (Audi and Subaru
would join it) to remain stable as of late. Arch-rivals Toyota and Honda report
faltering sales for the year so far (down 39% and 34%, respectively), but
Hyundai sales are down just 7.9% year-to-date. Its market share has increased
too, reaching 4.2% in the first five months of this year, up from 2.9% during
the same period in 2008, according to Autodata, a New Jersey-based market
research firm.
Hyundai executives have said they aim to boost U.S. market share to 5% by the
end of the year. Japan's Big Three--Toyota, Honda and Nissan ( NSANY - news - people
)--stand to lose the most if they make good on that goal. Lexus, down
47% for the year to date, is another big target. "They've extended their
portfolio, done clever marketing, added fillers, gone up-market, gone
down-market, gone left-market and gone right-market," says Lincoln Merrihew,
senior vice president at research firm TNS.
And they've made better cars. Hyundai was one of the big movers on the
survey, up from its 13th-place rank last year. Its score of 95 PP100 means
Hyundai owners reported 95 problems per 100 vehicles, down from 114 last year.
The survey covers problems reported in the first 90 days of ownership for more
than 80,000 new-vehicle purchases nationwide.
Hyundai--the fifth-largest selling automaker in the world--is still pushing
to offer affordable and reliable vehicles to Americans concerned about potential
job loss and volatile gas prices. Lately it has also emerged as a contender that
offers an alternative to drivers opposed to paying a premium for a luxury
nameplate.
The success of the new upscale Hyundai Genesis mid-size sedan is key. It
helped engage an entirely new kind of driver--one who wants all the trappings of
a Lexus, say, but feels slightly guilty about its insignia.
"We started noticing a reluctance to buy a badge," Krafcik says. "Consumers
are questioning the brand premium."
Hyundai executives took a risk in launching the $33,000 sedan on the cusp of
a bona fide recession, but sales numbers have been strong. Last month, it sold
2,079 units nationwide (several hundred more than competitors like the Lexus GS
and Lincoln MKS), spurred on, no doubt, by its distinction as North American Car
of the Year and by Hyundai's novel "Assurance" program, which allows customers
to return their new Hyundai vehicles if they lose their job after the purchase.
"If you say Hyundai, people used to say crappy cheap car, but now they go,
'Oh these are the guys that are willing to buy back the car if I'm out of work.
These are my buddies. They understand my life,'" says Robert Passikoff, the
president of Brand Keys, a market research firm in New York.
The majority of the Genesis sedans Hyundai sells are loaded with upgrades
that push the price well above $40,000 according to the company. And the coupe
version of the Genesis, a $22,750 306-horsepower rear-wheel drive sports car
meant to compete with the likes of the Ford Mustang and Infiniti G37, has
achieved critical praise.
It all bodes well for the Equus, the larger, plush sedan Hyundai showed at
the New York International Auto Show and plans to bring to the U.S. market in
the next two years.
The next step, Krafcik says, could be to create a second brand under the
Hyundai banner in which to sell luxury vehicles, much like Toyota did with Lexus
and Honda did with Acura. With the way things are going, it may not be much of a
reach.
