By on January 7, 2010

It was a very good decade...

This graph of Hyundai’s market since 1993 is a refreshing antidote to yesterday’s depressing Detroit market share picture. And it doesn’t take a whiz kid to deduce the single most important factor in Hyundai’s success. Notice a bit of an uptick starting in 1998? That was the year Hyundai introduced its 10 year, 100,000 mile warranty. It’s been suggested before on these pages that GM should address its “perception gap” with meaningful improvements in warranty coverage rather than more talk. After all, if it could fix Hyundais weak 1990s-era rep, it couldn’t hurt The General’s. This seems to be conclusive proof that warranties matter as much as the products they cover. After all, what good are a few extra horsepower or more interior room to a consumer compared to insulation from risk?

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44 Comments on “Hyundai’s Momentum Explained?...”


  • avatar
    Cammy Corrigan

    Like Toyota and Honda, Hyundai earned their reputation for reliability and quality deservedly, let them reap the rewards of it.
     
    GM sold customers cars with woeful build quality, poor reliability, dodged warranty costs, paid executives handsomely for failure, made excuses when competitors took market share from them and couldn’t recover it back, complained about competitors’ “advantages” when in actual fact they had no advantages, then went bankrupt and took taxpayers money and now wonder why customers are staying away from them. All the while this was happening, they blamed their customers for their “stupidity” or “lack of patriotism” in not buying their products.
     
    GM earned their reputation deservedly too, let them reap the rewards of it.

    • 0 avatar
      rockit

      Your partly right.  Hyundai has NOT earned their reputation for reliability. They HAVE earned a newly found rep for more up to date styling and SHORT TERM reliability.
      Ajla has a good point with the Hyundai warranty, it does  not cover expensive work  on engines (ie:the 2.7) that need the timing belts changed (which would cost a few thousand, throwing off Hyundai’s cost advantage to competitors), and other problems are known to to be dodged unless the dealership and the customer are persistent.
       
      And what is the fleet sales for Hyundai  for 2006-2009?  It is known (and very obvious) that Hyundai is dumping vast amounts of vehicles in fleets.

    • 0 avatar
      Jack99

      Is it just me, or does someone like repeating the same old fleet sales possibility in every single Hyundai post?  It seems like the past 4 Hyundai-related sales articles contain a comment made by you about that.
       
      And the powertrain warranty isn’t shown in the ToS to cover safety belt problems.  I believe that’s left to the bumper-to-bumper warranty.  But then again, what do I know?

    • 0 avatar
      Russycle

      Rockit, what am I missing?  A few thousand dollars for a timing belt change?  Shouldn’t be more than a thousand.  And that’s not a warranty item anyway, unless it’s failing prematurely.

    • 0 avatar
      rockit

      Jack99
      Yes i have said this before, but I have not been the only one on those posts, or the first person to mention it.
       
      As far as I know the Hyundai bumper-to-bumper warranty does not cover maintenance items, and the timing belt falls under that category.  Someone mentioned that on this site actually a few months ago.
       
      Russycle
      Even if it is $1000 for the new belt change that is still against Hyundai’s “value” image they are trying to present.  The issue is there are customers that assume that the bumper-to-bumper warranty covers that kind of work.

    • 0 avatar
      John Horner

      Current Hyundai four cylinder engines don’t use a timing belt. I’m not sure about the V-6s or older engines, but I do know that the four banger in our ’08 Sonata is timing belt free.
       

    • 0 avatar
      Jack99

      Well, that’s nice to know!  Way to kick aside an additional piece of liability.  The new 2011 Sonata comes with a Direct Injection system and supposedly won’t require transmission fluid replacement over the life of the car.  If this car delivers as promise, it’ll reduce maintenance costs as well as save the extra hassle of stopping by a center to get the job done.

    • 0 avatar
      DweezilSFV

      Cammy: Should be a sticky on every GM fan boy site out there. 100% true.

    • 0 avatar
      don1967

      Well said, Cammy.  My automotive tastes went from GM to Honda, and eventually to Hyundai, for the sort of reasons you cite.

    • 0 avatar
      AccAzda

      ROCKIT:
      Exactly.

      Hyundai HASNT earned ANYTHING.
      They HAVE figured out that the WARRANTY (above all else) will sell the car. (Which boggles the hell out of me.) It doesnt matter.. how cheap the car is (or where in the 13th level of hell or CHINA it may be) as long as its cheap, and some dumbasss = stealership is willing to sell it through their company.. to some bastard who needs a cheap car (read: cheaper than Japanese, and not DOMESTIC) then BAM.

      Its only now they are are pulling strings out of their asses.. that even I cant figure out how.
      The designer came from Audi.. he is DEFINATELY going to work his PEN over there.
      The concept of dumping a 6cycl for their mainstream car and going for a turboed 4.. is crazy. BUT, it makes perfect sense, knowing that midsizers are usually 4cycls. And of course, Honda admits to not doing vvti related updates in engine technology, or even 6spd trannies. Heck, Honda wont even bring over the DAMN CIVIC HATCH 5dr! *SCREAMS WTF!!*

      SO.
      Hyundai is up to something.
      An within 10yrs.. if this crazy shit keeps up.. they might actually be worth a purchase.

      Now.. its two wrongs dont make a right = purchase, just a fluke.

  • avatar
    ajla

    In GM’s world their 5 year/100K transferable powertrain warranty and 3 year/36K new vehicle warranty is superior to Hyundai’s 10 year/100K non-transferable powertrain warranty and 5 year/60K new vehicle warranty.

  • avatar
    TonyJZX

    to be fair, Hyundai (and Kia of late) are building good cars… not great cars that people write songs about… but good honest vehicles that are at least 75% as good as the best
    i don’t think there’s a better example of this than the 2006+ Sedona/Carnival/Entourage whatever the hell they call it… the 2005 did a 2/3 star ncap… the 2006 does a 5 star… the 2005 will put you in hospital, the 2006 you’ll walk away from in a crash
    they did the homework… they should reap the rewards… success does not happen overnight… GM however have the perrenial ‘dog at my homework’ excuse
    GM/Chrysler would have you believe they can turn the Titanic around on a dime… on YOUR dime no less

  • avatar
    getacargetacheck

    Nice graph and good point.  Now that GM’s costs are closer to Hyundai’s maybe a 100K warranty might increase sales and profits for GM too.

  • avatar
    gslippy

    I believe Chrysler reaped a market share increase when they introduced the 7/70 warranty two decades ago, but lost their collective shirt over it, subsequently retracting it.  Obviously, a great warranty can’t be an empty promise.
     
    As I said in another post, durability isn’t the only measure of quality.  Customers still have to like the product’s appearance, elegance, refinement, and value.  Hyundai is hitting all of these points very well today.

  • avatar
    seabrjim

    Well put, Cammy. My jaw is still hanging open. You summed up the last 30 years in 4 sentences! Now if only Whitacre and Lutz would visit the site tonight…

  • avatar
    findude

    I stopped looking at VWs when they reduced the warranty from 4 years to 3. If they don’t believe, why should I? That said, I had no problem buying a new Honda with only a 3-year warranty. I didn’t even buy an extended warranty, a bet that paid off 105,000 miles/8 years later with no problems. Reputation is as important as warranty.
     
    Since I’m the “car guy” in the family, relatives ask for my opinion. If they won’t listen to reason and buy a 3- or 4- year old used car and keep it for 3-4 years, I tell them to only buy a new car if the warranty period is longer than their loan. That gets them looking at car companies that believe in their own products, and it keeps them realistic about their budget.

  • avatar
    trucosm

    IIRC, in 1999-2000, Hyundai had no new models except maybe a redesigned Accent. So Hyundai’s gains were presumably due predominantly due to the extended warranty.

    Extended warranties aren’t a magic cure-all (did you know Mitsu has a warranty that matches Hyundai?), but doing something is better than the status quo.

    I’m guessing that RenCen already considered the extended warranty option. The two logical reasons NOT to match Hyundai is:

    1. the obvious explanation—warranty claims will be excessive or

    2. dealers make lots of money from Year 3 to Year 5 out-of-warranty repairs and are unwilling to give up that cash cow.

    Any other possible reasons?

  • avatar
    Kman

    Wow, how telling!
     
    Indeed, a strong warranty is necessary for a “damaged brand” to regain consumers’ confidence. The company has to say, through actions, not words, that it believes enough in its new product to put its money where its mouth is.
     
    The other part of Hyundai’s success is that… they did the right thing: put out a good product. This is a concept that has been coming up regularly in the B&B’s remarks about all these auto industry postings.
     
    As big and as complex as GM’s problems may seem, their solution is simple: good product, backed by actions, not words.

  • avatar
    twotone

    Car “warranties” are basically pre-paid service contracts. It would be interesting to see what the actual warranty costs the manufacturer and built into the new car price.
    Twotone

    • 0 avatar
      srogers

      Exactly.
      A warranty isn’t necessarily how long a a manufacturer “believes” in their product; but is an insurance policy that the manufacturer can afford to tack onto the price of the car (or take as a loss?).
      Any warranty extension will cost any manufacturer more money – maybe GM has decided to lose our tax money elsewhere.

    • 0 avatar
      Jack99

      It’s because of these tax dollars I find GM to be unpredictable and risky to buy from.  Now I’m not saying GM cars of low quality previous derogatory comments posted above about their cars notwithstanding.  But when a corporation is subsidized by “free” money, it’s free to make risky decisions that would normally raise a few eyebrows among corporate board members of companies that don’t receive such support.  At this point, I’m rather agnostic about GM.  I’m watching the Volt’s progress, but beyond a few accolades about the Cadillac CTS, no comment.

    • 0 avatar
      John Horner

      Yes and no. When the cost of any mid-life failures fall back to the manufacturer, the manufacturer has a powerful incentive to improve the product. But, when the cost of those failure hits the customer, the manufacturer can be very slow getting around to fixing the problem. The decades long weakness of certain GM V-6 engine intake gaskets comes to mind.
       

  • avatar
    TrailerTrash

    Wait.
    Please explain the facts here.
    These are warranty “headlines”.
    As Rockit suggest (I think) above, the devil is in the details.
    What is marketing and what is warranty?
    This article should give us the details, not just the headlines.

  • avatar
    Jack99

    Probably best not to posit a causal relationship from a correlation.  Offering a warranty on cars with questionable reliability would’ve simply been too expensive for Hyundai.  It would’ve been cheaper to continue making and dumping crappy cars on American consumers despite their bad reputation without a warranty.
     
    I think it’s wiser to consider the possibility that Hyundai’s rise in quality coincided with offering the warranty.   Hyundai knew it had to regain customer confidence if it wished to increase its market share. If it wanted to get into a safe zone away from competing soling on price with potential competition from China and India, it had to gain a reputation for high quality.  As long as they could sell cars without having to service shoddy, they could guarantee profit.  Since then, we’ve been seeing their quality ratings rise.  While initial quality ratings may not necessarily paint the whole picture, they’re still worth noting.  Plus unlike back in the 1990s when I knew actual people who were dumping shoddy Sonatas into the junkyard, I’m hearing more good things about Hyundai/Kia cars.  The Tucson and the Accent as of late especially have been gaining a loyal following. The Sonata is a late-bloomer, but the 2011 Sonata might change that.
     
    Now that it has reworked quality control, it’s working on style.  If I remember correctly, Hyundai became stagnant during 2007-2008 (albeit partially due to the credit crunch).  The Hyundai chief knew it was sink or swim, so he started hiring bigshots from the marketing industry and even from other auto companies.  Right now a lot of Ford fans tell me that one of Ford’s bigger mistakes was letting one of their chief engineers move to Hyundai.   Now I’m also hearing that the guy who helped design the Genesis used to work for BMW.
     

    So once again, I think the warranty only tells half the story.   Price also tells part of the story.  A low-cost production model and new factories built in the south seem to also provide other pieces.  Now in 2009, it’s unique styling.

    • 0 avatar
      TrailerTrash

      That’s all good and holy thinking, but what company isn’t interested in increasing market share and holding off competition?

      I bet, no matter how  this sight states otherwise, the companies GM, Ford and Chrysler have these same goals.
      Those and profits.

      So, once again I ask….what is the devil in the details?
      Rockit suggested such above.
      Are there hidden small prints that make the Hyundai warranty a little snaky?
      I mean transferable and non transferable are huge
      And disallowing certain parts is likewise sneaky for the average consumer shopping without his/her lawyer along.

    • 0 avatar
      Jack99

      Trailtrash,
       
      I would assume every warranty comes with fine print.  To the best of my knowledge, Hyundai and Kia are stringent about what kind of oil is allowed to be used for transmission fluid flushes in order for a powertrain/bumper-to-bumper warranty to be honored.
       
      Warranty information and fine print isn’t exactly mystical as you make it out to be. I’m sure that with enough online research and even asking a Hyundai dealership/service center for more details might reap more information.

    • 0 avatar
      baldheadeddork

      Good point. I was going to say that it was a mistake to presume the warranty drove sales without knowing how many customers were pulled into the showroom because of the warranty. There were a lot of things happening with Hyundai in this period.
       
      But what you said about the cost of this coverage begs a big question: If a 10/100 warranty were financially feasible for a company with Hyundai’s dodgy record (at least when this began), then why hasn’t anyone else done it? No offense to Ed, but bumping up the warranty to a big number like 100K is a pretty obvious way to make yourself stand out – if you can do it and still make a profit.
       
      Or if you’re willing to eat the losses while you buy market share.
       
      Look at Hyundai’s warranty coverage and the costs that have to come with it, and then add on their huge growth in incentives and the fall of the dollar against the won, and you gotta at least consider that Hyundai is buying their growth.
       
       

    • 0 avatar
      Disaster

      “Look at Hyundai’s warranty coverage and the costs that have to come with it, and then add on their huge growth in incentives and the fall of the dollar against the won, and you gotta at least consider that Hyundai is buying their growth.”

      You might say that…until you looked at their books and see they actually made a profit last year.  That is more than most car manufacturers can say.  Toyota lost something like 8 billion.  You could say that Toyota bought their market share with that 8 billion.

  • avatar
    bumpy ii

    The warranty is important, but only half of the solution. The other half, of course, is to build better cars. 1998 was about the time the carbuilding arm was spun off from the Hyundai industrial empire, which meant it had to live or die on its own resources rather than being carried by the rest of the chaebol. Chung Mong Koo came into power in 1999 with a solid determination to improve the cars through better engineering, sourcing better parts with longer lifespans, and design to minimize the potential for assembly errors. Before he ran the whole company, his job was to run… the warranty claims department. Maximum Bob could use a year or three interning that office in the Ren center.

    • 0 avatar
      Jack99

      Good point.  To add to that, the Hyundai USA chief was recently quoted as saying Hyundai isn’t subsidized by profits from cars sold in Korea but from cars sold in in its US branch.  Go figure.
       
      Right now, commodity prices are so ridiculously high that Hyundai has to procure its own steel rather than buy Korean government-subsidized steel.

  • avatar
    Juniper

    Anyone that thinks Hyundai has excellent reliability needs to check out TrueDelta

  • avatar
    Darth Lefty

    The other thing Hyundai did about the same time was start selling cars with lots of options installed.  They figured out that if they couldn’t compete on quality or image or performance (and they couldn’t, then) they could darn well install power windows and locks and a radio and AC in everything, so it’s not  a “penalty box”, and still sell it for less than a comparable Japanese car.  Previously they had been selling cars that barely had a heater and cost a LOT less, but they were too grimly economical for the American market.

    • 0 avatar
      Jack99

      Agreed, which is why a lot of us are watching Hyundai very carefully.  Although I am hearing about Hyundai/Kia cars lasting longer than usual, they don’t have the kind of record that the Japanese carmakers do.  I’ve logged nearly 20,000 miles on my 08 Sonata and am cautious about any issues that might arise.  Beyond the normal perks (e.g. Not-so-sporty handling, interior creaking sounds that vanished after the first 10k miles, etc) I haven’t had any real complaints.  I’m hoping it stays that way until at least 100k miles though judging from where I plan to be in the next 4-5 years, I probably won’t need the car to last past 60-70k miles.

      For what I paid, I got a sweet bargain. Here’s to hoping Hyundai has genuinely improved. My friend who used to sell cars for Toyota and GM tells me that the quality’s there, but the stigma remains. Let’s hope that’s the case!

  • avatar
    Disaster

    Hyundai has moved up in Consumer Reports quality survey to 8th place.  That is still below Honda and Toyota, but above Nissan and Mitsubishi and every U.S. manufacturer.  If they just introduced their extended warranty, without increasing quality they would have lost their shirts…like Chrysler did when they made a similar move.  Instead, Hyundai studied Toyota and invested heavily in quality.  To those that say Hyundai is “buying” its way into the U.S. market, how do you explain their profits last year…one of the few auto companies to make any.  If I recall, Toyota lost over 8 billion.

    • 0 avatar
      Jack99

      Not that I necessarily agree or disagree with you, but Hyundai appears to have a lower cost structure.  Even though Toyota Motor in terms of overall net value and world market share dwarfs Hyundai Motor, Hyundai Corp has the advantage of being a chaebol.  Chaebols in Korea tend to enjoy the advantage of economic synergies that result from businesses under the same umbrella strengthening one another because of complementary focuses.  I am willing to bet that Hyundai Motor obtains steel from Hyundai Heavy without having to fear seasonal shortages and the extra time associated with signing contracts with foreign companies.  Plus let’s not forget that Hyundai benefited from a weaker Won.
       
      The profit numbers are in, and despite its typical 40% off incentives, Hyundai still profits.  Only question is, are their cars able to withstand 100k+ mile mark as their Japanese counterparts’?  We don’t know for certain.  But Consumer Reports shows that on a per 100 car basis, they’ve been continually improving since the 1990s.  Hyundai owners surveyed after 3 years of ownership according to CR showed fewer complaints, sometimes being lower than the industrywide average.
       
      So in sum: The jury’s still out.  I’m rooting for Hyundai and hoping CR’s right on the dot.

  • avatar
    John Horner

    I’ve been hammering on the point that GM should have taken a page from Hyundai’s book for so many year on the internet that I blame some of my gray hairs on it. Heck, I was having that argument on usenet groups back when geeky people like me still used newsgroups!
    A modern maintained by the book car shouldn’t have any non-routine maintenance items break in the first 100k miles of use. If they do break, the manufacturer should pay to fix it.
    BTW, I bet that Hyundai dealers do a higher percentage of routine maintenance work on Hyundais in ownership years 3-10 than do those for brands with more meager warranties.
     

  • avatar
    Buckshot

    It´s really simple.
    You can´t have a long warranty and a poor quality car.
    Well, you can but you will be out of business pretty soon.
    So, i have no fear of buying a Hyundai.
    Hyundai is an amazing company really.
    They have gone from a poor copy of a japanese car, to a major player in a short time.
     

  • avatar
    Truckducken

    Jeez, I was hoping this discussion would be less about Hyundai and more about The General. However, there was no need to read past the first post – Cammy nailed it. As far as the consumer is concerned, GM is still running in ‘planned obsolescence’ (okay, planned failure) mode. Nothing they are doing in the marketing arena – redesigns, features, mpg – does anything to change this impression.

  • avatar
    SkiD666

    Lets say we believe GM that they are now designing vehicles (and their individual parts) to last longer.

    Does anyone really believe that they would increase their warranty before the majority of their vehicles conform to this new standard.

    Until almost all their lineup has been refreshed, I don’t see it happening any time soon (maybe 3 -4 years down the road if they are ‘profitable’).

  • avatar
    TrailerTrash

    To me, it still comes down to what Hyundai would I buy, and over what other offer?
    I can’t think of one.
    Their best, the Genesis, is not my choice over the SHO. Its not even close.
    Even the G37.
    I must admit, I give a lot of points for AWD.
    Of their lower ends, I would choose a Mazda3, Civic and others.
    Midsized Azera? the new Sonata coming out soon, but again…over what?
    The Fusion, Malibu, Mazda6 or even the Altima are better choises.

  • avatar
    don1967

    I doubt Hyundai would be so foolish as to knowingly over-warranty a bad product, after watching the Chrysler experience a few years ago.    Only premium brands can afford to over-warranty, since they have the profit margins to cover the risk.
     
    Input by Michael Karesh would be welcome here, but I suspect that product reliability does correlate with warranty.   At least among the mainstream brands.   The Japanese, for example, have long out-warrantied the Americans even when they didn’t have to.  And where their warranties have shortened (ie: when Nissan Canada quietly downgraded its 6-year “major components” warranty into a 5-year “powertrain” warranty), it has generally foreshadowed a period of cost-cutting and quality declines which are now showing up in the consumer literature.
     
    Interestingly enough, Hyundai does not provide the 10-year powertrain warranty in Canada;  just a 5-year bumper-to-bumper plan.   That probably reflects our brutal winters up here, with no Floridas or Californias to average down the cost of repairs.

    • 0 avatar
      Jack99

      don1967,
       
      Major props.  I’d give you rep points for that comment if TTAC had the system in place.  I’ve been wondering for a couple of months just why the warranty in Canada isn’t as generous.  I’m now inclined to believe your theory’s right on the mark.
       
      And yes, I stand by my comment earlier.  No company would knowingly provide warranties on a shoddy product.

  • avatar
    cos999

    Edward-With all due respect you are incorrect.
    Hyundais uptick is due to their 5 yr 60k bumper-bumper warranty, not the 10-100. Too many items excluded on the 10/100 but the 5 yr 60k is just like everyone else’s 3/36.
    Personal experience:
     Bought a 2002 Santa Fe as CRV’s were impossible to come by and decided to take chance on hyundai cause of 5/60 bumper-bumper. Feb 06-90k miles, car died.  A plastic part in the engine broke…shrapnel got under timing belt..trashed the engine. Hyundai HQ said sorry, the plastic part is non warrantied part and if a warrantied part takes out a non-warranty part you are not covered. Car sat for 3 weeks in dealer lot…they wanted me to trade-in on new one, eventually HQ agreed to put in rebuilt engine..I sold that car as is for $2500 5 months later..pristine condition..well mainatained..had to reduce price from 5000 to that to get it sold.
    I have run honda’s and toyota’s to 200k miles..Saturn, Hyundai and Nissan all crapped out with major, major issues before 100k!

    GM and Chrysler are DEAD w/o offering a 5/60 bumper-bumper. That’s the only way anyone will TRY their products again.

    PS I changed the timing belt on the santa fe on my own nickel at the mileage they recommend as well and because i did so dealer said if the timing belt failed and trashed the engine, it is covered under 100k warranty. But b/c a non-warrantied part trashed the timing belt, NOTHING was covered.


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