Small vehicles drive Hyundai Kia's growth
The global economic crisis has dealt a crippling blow to the world's automotive industry, bringing significant changes to the playing field. U.S. giants General Motors Corp. and Chrysler LLC have been reduced to receiving handouts from the government.
Japanese carmakers have also been hit hard by the crisis.
According to analysts' estimates, Toyota Motor Corp. is likely to post net losses running into hundreds of billions of yen.
Other Japanese heavyweights including Honda Motor Co. and Nissan Motor Co. are also forecast to suffer heavy losses during the first three months of the year.
The Korean automotive industry has not been an exception.
The country's smallest automaker Ssangyong Motor Co. has gone under court receivership and GM's local arm GM Daewoo Auto and Technology Co. is suffering from serious liquidity problems.
Korea's auto industry depends heavily on exports and the most significant threat is falling sales in overseas markets.
According to the Korea Automobile Manufacturers Association, car sales in the Unites States are likely to fall as much as 20 percent this year, while the European market is projected to suffer similar setbacks.
Although subsidy programs implemented by various governments are lifting sales, experts don't see the automotive industry's troubles blowing over in the near future.
According to the U.S.-based automotive industry analysis firm CSM Worldwide Inc., the world's automobile output will fall further this year to come in at about 52 million units from last year's 65 million.
What's more, CSM Worldwide predicts that output will not remain below the 2007's 68 million units for at least three to four years.
Small, compact cars
However, for carmakers that have strong small car lineups, the economic downturn has brought unexpected benefits. The demand for small cars, which has been rising as motorists seek more fuel efficient vehicles and governments strengthen environmental regulations, has been boosted even in markets that favor larger vehicles such as the United States.
According to the KAMA, out of the 412,000 passenger cars Korean carmakers exported in the first three months of the year, those in the compact and smaller segments accounted for 72.4 percent and 10 bestselling models accounted for 72 percent of the total.
Of the top 10 exported models, five were compact cars and smaller vehicles produced by Hyundai Motor Co. and Kia Motors Corp.
The two companies' small cars, including the cee'd and i30 - designed specifically for overseas markets and the perennial bestseller Avante - have won praise from foreign consumers, media and industry analysis companies such as J.D. Power and Associates.
Aided by the increasing popularity of small vehicles and improvements in brand images brought on by vehicles like the sports sedan Genesis, the Hyundai Kia Automotive Group's two carmakers were able to minimize the impact of the slowdown in the U.S. market which accounts for about 20 percent of their global sales.
While the U.S. auto market shrank by roughly 18 percent last year, the two Korean carmakers' decrease in sales were contained at about 10 percent.
As a result, the two companies' February U.S. market share rose to 7.6 percent, the largest ever monthly market share held by the Korean auto group, and the companies maintained their combined market share at the same level last month.
Although the rise in market share was caused largely by the fact that the two carmakers' sales fell by smaller margins than that of rival firm. Experts say that the developments bode well for Korean carmakers.
"I don't think the increase in market share can be interpreted as a temporary phenomenon. The Genesis sedan is doing well in the United States and as the Lexus brand improved the image of the Toyota brand, the improvements in Hyundai Motor's brand image achieved through the Genesis will improve the image and sales of lower end vehicles," said Sunny Sohn of KB Investment and Securities Co.
"In addition, the Sonata, Avante and the Accent, which make up 65 percent of Hyundai's U.S. sales, will be replaced with new versions helping Hyundai Motor further expand and consolidate its position in the United States."
In addition to giving the companies an opportunity for growth while competitors flounder, Hyundai Motor and Kia Motors' strength in small vehicles is likely to come in handy in the years to come.
According to the U.S.-based economic research firm Global Insight, small car sales will reach about 18 million by 2015 compared to 10.6 million small vehicles sold in 2000.
As sales increase, small vehicles will come to account for about 22.7 percent of overall automobile sales by 2015, giving more room for growth to Hyundai Kia Automotive Group and other carmakers with strong small car lineups.
By Choi He-suk
(cheesuk@heraldm.com)
2009.04.24
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