Hyundai fumbles in US after former hit car Elantra stalls

SEOUL--At last February's Super Bowl, Hyundai Motor hired 'X-Men' movie star Ryan Reynolds for an ad plugging the new version of its Elantra sedan. Not in the script: a slide in first-half sales of the South Korean automaker's U.S. mainstay.


  When the previous redesign hit the United States in 2011, sporty styling at an attractive price helped it take on Japanese rivals like the Honda Civic and Toyota Corolla. At the Elantra's peak, more than one car in every 20 sold in America was a Hyundai, cementing the firm's place as the world's fifth-biggest automaker combined with sister company Kia Motors.
  But not even a Hollywood superhero could shield the new Elantra from structural change in the U.S. auto market. Hyundai's aspiration to sell premium cars saw it deliver a more sedate Elantra this year with a higher price - just as American buyers turned away from sedans, rediscovering a taste for gas-guzzling sport utility vehicles in a world of low oil prices.
  From being Hyundai's top U.S. seller last year, Elantra sales skidded 25 percent in first-half 2016, trailing a 7 percent drop in its market segment, according to data from the company and Autodata Corp. On Tuesday, Hyundai said net profit fell for the 10th straight quarter, warning the U.S. market is about to get tougher still.
  "I have built my sales and my reputation at Hyundai as being the value brand," said Scott Fink, chief executive of Hyundai of New Port Richey, Florida, the biggest U.S. Hyundai dealership. "I understand the company's desire to move upstream...but now you're in the same ocean with Toyota and Honda, and Toyota and Honda most specifically in the U.S. have a much longer and better reputation than Hyundai, and we're not there yet."
  Fink, a member of Hyundai's U.S. dealer council, said the firm "moved too quickly" in attempting to raise prices for its cars. "U.S. dealers are disappointed by the sales performance of the 2017 Elantra," he said, referring to the latest model in a phone interview with Reuters.
  Hyundai has invested in marketing since the late January launch, expanding the Elantra line-up. It said U.S. Elantra sales have steadily improved month on month, describing sales in the first half of July were "very strong".
  Zayong Koo, Hyundai vice president in charge of investor relations, told an earnings conference on Tuesday that sales incentives to coax buyers into showrooms jumped in the first half, without saying how much the promotions affected profitability. In the first half, Hyundai sold 374,000 cars in the United States, up 0.8 percent from a year earlier, bolstered by sales of its Tucson SUV.
  Under its "Paycation" programme, Hyundai is now offering sales with zero payments until 2017 on the new Elantra, as well as car loan financing with a low annual percentage interest rate of 0.9 percent for up to 60 months. Offering incentives to stimulate buyers comes at a financial cost that Hyundai will have to soak up. But its shrinking U.S. market share highlights the need for action.
  In 2011, on the strength of the previous generations of the Elantra - which dates back to 1990 - and the larger Sonata sedan, Hyundai's U.S. market share peaked at 5.1 percent. But the Elantra's fall from grace, along with a slow start for a 2014 redesign of the Sonata cricised as staid, means Hyundai's market share has now been squeezed back to 4.3 percent, its lowest since the 2009 economic downturn.
  The falling popularity of sedans versus SUVs and crossover vehicles that span the two categories has hit Hyundai harder than peers. Sedans accounted for 73 percent of Hyundai's U.S. sales in the first half of this year, while the portion was 42 percent for the industry, according to Autodata. The redesigned styling of its sedans is more "mature", the company says.

The Daily Herald

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