Hyundai – from Ashy to Classy

American manufacturing has been in decline for decades. The rise of Hyundai is indicative of who has been succeeding.

For those of you who lived in the US during the 80s and 90s, you may recall the embarrassment that went along with driving the a Hyundai. If not, allow me to refresh your memory.

  1. How do you make a Hyundai go faster? A towtruck.
  2. What’s on pages 4-5 of the Hyundai owner’s manual? A bus schedule.

Even praise of the vehicle highlighted its affordability rather than quality. $5,000 was cheap, even in 1986.

A lot has changed since then. Hyundai was able to replicate the success of Japanese car makers decades earlier. When Toyota, Honda and Nissan began exporting cars to the US in large number in the post WW2 period, they too were ridiculed for being small, weak and cheap. Now, there is more or less a consensus that the Japanese make better cars than Americans. This is not to say that American consumers suddenly decided to change their minds and prefer foreign cars. Rather, the foreign cars got better, and foreign manufacturers learned a lot more about American consumer mentality.

This is the dream of most manufacturers in emerging markets – gain a foothold in rich countries with cheap alternatives and gradually improve quality and marketing until you can offer a better product than the domestic competition. It took the Japanese a couple of generations to overcome the initial stigma. It took Hyundai less than two decades. Hyundai (along with its partner Kia) is currently the 4th largest automobile manufacturer in the world, and the fastest growing.

20 years ago, nobody would have guessed that a Hyundai would soon look like this.
The question for me now is, which improved first, vehicle quality or marketing? If better marketing leads to better sales, then that profit can be invested in better quality. But then again, can you sell lemons with good commercials? The truth probably lies somewhere in the middle.  Either way, Hyundai has enough money to regularly invest in Superbowl ads (which now cost about $3 million for 30 seconds) that focus on performance rather than affordability.

At first glance, this might not seem significant – there was a company that wasn’t that good, and then it became good. So what? Does the Hyundai experience signify a larger trend? Yes – especially among Korean companies.

Samsung is now the largest IT company in the world in terms of revenue – not bad for a company that worked mostly in ship-building and construction a few decades ago. LG is even more similar to Hyundai in that it entered the US markets with cheap consumer electronics (remember Goldstar?) and invested heavily in R&D and marketing. On the list of largest IT companies by revenue, LG is currently just behind Intel.

This does not spell doom for the American economy. The rise of knowledge industries is real, and even Detroit has witnessed a remarkable turnaround in the past couple of years. But companies like Hyundai, as indicative of the Korean economy, will continue to emerge. Fareed Zakaria said it best when describing his book, The Post-American World, as being “not about the decline of America but rather about the rise of everyone else”.

In 2009, the Hyundai Genesis was named the North American Car of the Year at the North American International Auto Show in Detroit. Earlier this year, the Hyundai Elantra was given the same honor for 2012. It won’t be long before Hyundai joins in on the chorus of mockery directed at Chinese and Indian cars when they start entering the US market.

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One thought on “Hyundai – from Ashy to Classy

  1. I <3'ed my elantra! I definitely agree… when people saw me buy one, they laughed at me and said I wouldn't make 50k mi. They stopped laughing at 120k mi of hard driving, even in "field" conditions over rocks, in fields, getting stuck in mud and pulled out w/ chains… running all day, etc.

    I think that's the thing… the only way to change perceptions is to MAKE A DAMN GOOD PRODUCT… people eventually stop laughing, and then the marketing can follow. If the marketing precedes quality, then people laugh.

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