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Competitors hot on Japanese automakers’ heels

The Yomiuri Shimbun

TOKYO — What worries Manish Sahay, the sales manager of Star Hyundai-Bayside, a New York City dealership in Queens for South Korean automaker Hyundai Motor Co., is a stock shortage.

“Right now we have a lack of inventory. That’s just one of the issues that Hyundai is dealing with — just too much demand and not enough supply. We’re very limited in our (available) inventory and that’s one of our biggest drawbacks at this point. All Hyundai dealers have inventory issues,” he said.

Without doubt, he has been kept busy by demand. The number of Hyundai cars sold at his dealership each month this year has risen to 100, up 30 percent from last year.
He said his shop has the potential to sell about 170 cars a month but doesn’t have enough stock.

New car sales in the United States have been steady despite the nation’s slowing economy. The U.S. market share of Hyundai and its affiliate Kia Motor Corp. rose from 7.7 percent in February to 8.8 percent in October.

Production cuts among Japanese automakers, due to the country’s March earthquake, contributed to the situation. But that hasn’t not been the sole cause of Hyundai’s growth.

Motor journalist Naotsugu Mihori argues the quality of a Hyundai luxury sedan is comparable to its Japanese counterparts.

“I felt it was very smooth and comfortable to ride in. If you were driving blindfolded you wouldn’t be able to tell the difference between Japanese and Hyundai sedans,” he said.

In 2009, with the global economy in the depths of the recession, Hyundai started a “Lose your income, return your car” campaign for customers who were reluctant to buy a car due to fears over losing their jobs. Under the deal, the owner of a new Hyundai car can return the vehicle to the dealer and cancel all remaining loan repayments if their employment is terminated within 12 months of the car’s purchase.

In addition, Hyundai subsidized clients who were struggling with rising fuel prices by offering gasoline at a fixed price of $1.49 a gallon in its Hyundai Assurance Gas Lock promotion program. Hyundai paid for the difference in gas prices.

“Hyundai took an offensive strategy to change the crisis into an opportunity,” said Nam Myung Hyun, a professor at Hannan University of South Korea. The strategy was appealing to U.S. citizens, the former Hyundai Motor director said.

Hyundai is also slowly penetrating the Japanese market.

Hyundai is not displaying any passenger cars at this year’s Tokyo Motor Show, but the Impreza, a small car displayed by Fuji Heavy Industries Ltd., is equipped with rear light components produced by a Hyundai-affiliated parts maker. It is the first time that a Hyundai-affiliated maker has supplied large parts for the Japanese automaker.

“Now, South Korean parts are our most serious threat,” an official at a Japanese autoparts maker said.

Germany’s Volkswagen cars are continuing to sell well in Japan despite a six-month delivery time for some models, which has been in place since last year. This is partly due to the cost efficiency of Volkswagen engines. The automaker has been protecting its brand image by not cutting prices, despite the euro depreciating against the yen.

In contrast, Japanese carmakers have suffered globally even though they have until recently enjoyed high market shares around the world.

According to Fourin Inc., a global automotive market research and publishing company, the share of Japanese cars in the global market plunged from 32.2 percent in 2008 to 28.6 percent in 2010.

In addition to effects of the Japanese earthquake and the recent Thai flooding, a host of other challenges —appreciation of the yen, a high corporate tax rate, delay in trade liberalization, labor regulations, measures to combat global warming and an electricity crisis — hang over Japan.

But that doesn’t mean Japanese cars have lost their appeal.

In January, the i-MIEV, Mitsubishi Motors Corp.’s electric vehicle, won the top position in Norway’s small car market.

Norwegian motorists are offered a range of incentives to drive electric vehicles, and environmentally conscious customers flocked to buy the car.

Nissan Motor Co. released the Leaf electric car in December last year, and about 1,000 units per month have been sold in the United States. MMC and Nissan have been leading the global electric vehicle market.

“Including the fuel efficiency of hybrid and gasoline-engine cars, Japan’s environmental technology is at the world’s highest level. No country can surpass Japan easily,” said Chief Executive Officer Toru Sakuragi of SC-ABeam Automotive Consulting, a research and consulting firm for automotive clients.
©2011 The Yomiuri Shimbun (Tokyo)

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