A turning point for Hyundai next year

Next year might be tough for Hyundai Motor Co, but it could also be a turning point.

"We are refur-bishing our brand image in China," says Young-Key Koo, chief representative of Hyundai Motor China for sales and marketing.

Hyundai was the No 2 imported auto brand in the first half of this year, trailing only Japanese rival Toyota, according to statistics from the State Information Center,

It has sold 24,000 vehicles in China so far in 2007, an increase of 11 percent year-on-year, Koo tells China Business Weekly.

"If we did not stop importing our Matrix (a mini-MPV model) this year, there would have been at least 4,000 more units sold," he says.

"But we had to give up the popular model because it only has two engine choices of 1.6- and 1.8-liter and targets at average consumers, which is not in line with our strategy to build Hyundai as a high-end brand."

The South Korean carmaker now imports five models to China. It also has a joint venture in Beijing producing economical cars that carry the Hyundai badge. The venture's domestic-made Elantra and Sonata models are widely used as taxis in Beijing.

"Improving a brand image from a taxi to a luxury sedan is not easy or simple in the short term," Koo admits.

He says that Hyundai will introduce two more luxury models to China next year.

In April, the Rohens, similar to its Genesis concept car exhibited at last month's Guangzhou Auto Show, will hit the market during Auto Beijing 2008.

In September, Hyundai will launch its New Santa Fe and Azera for 2009.

"In October, we will bring a new sports car called the BK to China, replacing the locally made Coupe," says Koo. The BK, 23.5 cm longer and 4.5 cm wider than the Coupe, will also carry a higher price tag.

Koo also says that in the first half of 2009, Hyundai will import its most expensive, currently unnamed luxury sedan with a 4.8-liter engine to China. It also plans to unveil its CUV - car-based utility vehicle - a crossover between sports utility and multipurpose vehicles.

"Then we will keep the pace of introducing one or two new luxury models every year to reinforce our premium brand image. We have the same strategy as our Japanese rivals," Koo says.

"In 2010, we will officially launch our luxury brand name and logo along the lines of Toyota's Lexus, Nissan's Infiniti and Honda's Acura. All of our luxury models will have the new badge."

The tariff on autos dropped from 90 percent to 25 percent over the six years following China's entry into the World Trade Organization. The world's major carmakers are now rushing to import luxury models that are difficult to manufacture locally.

According to the China Association of Automobile Manufacturers, imported vehicles still dominated the luxury auto market in the first half of the year. For the first time the number of imports grew faster - some 33.7 percent - than domestic production, which increased 26 percent.

"Chinese consumers are now showing growing favor for high-end or luxury sedans. Although the market size is not big, the growth rate is very high. It's not too late for Hyundai to build itself as a high-end brand in China," Koo says.

All five major luxury auto brands posted an increase of more than 30 percent in sales last year. Lexus, the only Asian brand in the mix, saw sales soar 160 percent. The Japanese luxury leader says it will have an 80 percent sales increase this year.

To cash in on the surging demand for upscale sedans, another two Japanese luxury brands, Infiniti and Acura, have also entered the local market.

Koo insists Hyundai will not be left behind.

"We are offering different models with high quality and at competitive prices. The only thing we have to do is to improve our image."

As part of the effort, the company's advertising budget was increased 60 percent this year.

It is also making efforts to strengthen its sales and service network in China, with the number of dealerships growing from 23 to 42.

Starting in September, Hyundai begun to upgrade its 4S - sales, spare parts, service and survey - stores.

"Hyundai must also ensure its exhibition halls and dealership displays are luxurious," says Koo.