In a tough year for the car business,
picked up momentum in 2020, aided by a slate of new sport-utility vehicles that have resonated with American buyers.
The South Korean auto-manufacturing giant, which sells vehicles under two separate companies—Hyundai Motor Co. and affiliate
Motors Corp.—expanded its U.S. market share more than any other major auto maker through November and held retail sales steady during the period, defying the broader industry’s 12% drop, according to market research firm J.D. Power.
As investors have lavished attention on electric-vehicle startups, shares of Hyundai and Kia, listed separately on the Korea Exchange, also rallied in 2020, climbing 67% and 49%, respectively, through Tuesday’s close and outperforming other traditional auto makers such as
General Motors Co.
“The market has been down for everyone, but they seem to be the ones coming out of it stronger,” said
senior industry intelligence manager at research firm Cox Automotive.
Hyundai and Kia have for years worked to elevate their profile in the U.S., where both started out as budget brands selling to price-sensitive buyers. The two had some success early last decade, redesigning their sedans with new looks and improved fuel economy, helping them boost sales.
But the brands were slow to pivot to SUVs as demand for these vehicles took off, leaving them with sedan-heavy lineups that waned in popularity.
In the past few years, the group’s executives have redoubled their efforts in North America, sharpening their focus on SUVs and trying to move upscale with the launch of a separate luxury brand, Genesis.
When Covid-19 hit the U.S. this year, Hyundai revived a promotion, similar to one introduced during the 2008-09 financial crisis, to reassure buyers worried about the economy. It offered to cover up to six months in payments for buyers if they lost their job because of the pandemic’s impact.
The brands also benefited from fewer pandemic-related disruptions at its factories in Korea, which build many of the models for the U.S. market, and a reputation for selling feature-loaded vehicles at a lower price than rivals, a formula that has given them an edge during economic downturns, executives and dealers say.
“Even though they’ve gone more mainstream and more upmarket, they always try to promote their value,” said
an analyst with car-shopping website Edmunds.com.
Like other car companies, overall U.S. sales for Hyundai and Kia were dented by a big drop in rental-car business. But the decline hasn’t been as steep as the broader industry’s.
Strong retail sales—purchases made by individual customers—helped lift the combined U.S. market share of the group’s three brands to 8.6% through November, up from 7.8% during the same year-ago period and its highest level since 2012, according to research firm Wards Intelligence. Auto makers are scheduled to release year-end U.S. sales results Tuesday.
The two companies also strengthened their pricing by cutting their overall spending on discounts and expanding the appeal of their brands to more- affluent buyers by selling larger, pricier SUVs, analysts say.
The share of Hyundai buyers with a household income of more than $100,000 was 43% this year, up from 33% five years ago, according to data from Cox Automotive. For Kia, that share has jumped to 36%, up from 23%, the firm’s data shows.
“We’re trying to highlight how good our products are as opposed to just selling the deal,” said
Hyundai’s global chief operating officer.
Much of the recent strength has been driven by the release of two new SUVs—the Kia Telluride and Hyundai Palisade—that have won accolades from auto reviewers and remained in high demand throughout the year, dealers say.
The auto-making group has added other SUVs as well in recent years, including subcompacts like the Hyundai Venue, which is designed to appeal to younger and more budget-conscious buyers. Hyundai and Kia now sell about a dozen SUV models in the U.S., up from six nameplates five years ago.
president of O’Brien Auto Team of Illinois, which owns Hyundai and Kia dealerships, said some of the group’s newer models, like the Kia Telluride, are helping change customers’ perceptions of the two brands.
“Consumers haven’t thought of Kia as the ‘bad credit’ brand it was,” Mr. Gremore said.
The challenge now for Hyundai and Kia will be holding on to the recent market-share gains as rivals regain their footing and replenish dealership stock depleted by Covid-related plant shutdowns this spring, analysts say. And executives are still wary of the durability of the market’s recovery.
Past quality problems also continue to dog the two Korean car manufacturers, denting earnings.
This fall, Hyundai and Kia agreed to pay up to $210 million in civil penalties as part of a settlement with U.S. safety regulators, who say the two brands failed to recall 1.6 million older-model vehicles for engine issues in a timely manner.
The two companies together this fall set aside more than 3.6 trillion won, the equivalent of $3.2 billion, to cover expenses related to engine problems on older models, some of which the National Highway Traffic Safety Administration is still investigating after receiving reports of vehicle fires.
Hyundai said it is cooperating with the probe and will work closely to address issues with regulators. Kia, in a statement, denied that it was slow to recall vehicles and said it had settled with regulators to avoid a lengthy legal dispute.
Despite these hurdles, investors have warmed to the stocks, encouraged by the recent strength of the U.S. market and Hyundai’s aggressive push into electric vehicles, analysts say.
In August, Hyundai said it would establish a new subbrand for selling electric vehicles in 2021, with three battery-powered models planned in the next four years. Its stock jumped 15.5% in trading the day following the announcement.
Mr. Muñoz said the company was late on SUVs, but it has learned its lesson and wants to lead on electric cars.
“We don’t want to be fast followers,” he said. “We want to be pioneers.”
Write to Ben Foldy at [email protected]
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