By on October 5, 2011

Hyundai and Kia are technically separate companies, with Hyundai owning less than 50% of its junior partner. But as the two major divisions of the Hyundai-Kia Motor Group, the two firms share resources and align their strategies through carefully-maintained relationships in the classic Korean chaebol (conglomerate) fashion. Hyundai has long been the senior partner in the relationship, getting the newest technologies and the most expensive new cars. But in both Korea and abroad, Kia is beginning to catch up with its big brother, raising questions about the future shape of its delicate relationship. Together, Hyundai and Kia enjoy a dominant position in Korea, earning 45.2% and 33.2% of the overall Korean market in 2010 (including commercial vehicles).  But if you just look at sedans and SUVs, the Korea Herald reports that their 2010 market share numbers are much closer: 39.6% and 35/7% respectively, and converging

Hyundai Motor Group is focusing on the possibility that Kia will catch up with Hyundai within one year in terms of monthly market share ― for sales of sedans and sport utility vehicles ― domestically for the first time…

The gap for sales of sedans and SUVs have continued to narrow ― 22.9 percentage points in 2007, 17 percentage points in 2008, 15.4 percentage points in 2009 and 3.9 percentage points in 2010.

And this fresh-brewed sibling rivalry isn’t just about Korea: around the world, Kia is catching up. And this shifting relationship is shaking things up at the highest levels of the group’s leadership.

Fox Business reports that, last month in Korea

Kia’s domestic sales rose 4.4% but Hyundai’s slid 1.1%.

And that differential could be higher if it weren’t for the company’s single largest “problem”: demand is outstripping supply. The Korea Herald notes

“Some purchasers of Kia cars have to wait two or three months to see their products due to the weaker production capacity,” a local dealer said.

So, why is Kia pulling ahead of Hyundai in Korea? The Herald opines

Automobile dealers attributed Kia’s noteworthy sales performance in the local market to growing popularity of four models ― K5, K7, Sorento R and Sportage R.

Kia Motors has been successful in attracting Korean consumers by launching cars with innovative designs after the company scouted Peter Schreyer, a car designer known for helping to create the New Beetle and the Audi TT, in 2006.

And Automotive News [sub]‘s Rick Kranz has a similar interpretation

While the styling for the Sonata has been a home run in the United States, the Korean market initially was turned off by what some buyers might say is the car’s audacious design language, which Hyundai calls “fluidic sculpture.”

Simply, the Korean market apparently prefers something less radical; judging from Hyundai’s past model line, maybe “ultraconservative” is a better term.

“There are some people who are very critical of our (design) activities” in Korea, Cho Won Hong, Hyundai Motor’s chief marketing officer, told Beene. “However, we believe we should continue to apply this design identity.”

And because both firms are seling more vehicles than they can produce, a decision will have to be made at the top of the group’s leadership in order to determine how to invest in future production capacity. And because that decision will define relations between the two firms, it has huge political implications. The Herald notes

Executives of Hyundai Motor Group, however, are allegedly taking the situation seriously.

Should Hyundai be overtaken by Kia at home, the automaker will see its brand image as the long-standing No. 1 carmaker of Korea undermined and overseas sales damaged.

“It is quite interesting whether Hyundai Motor Group chairman Chung Mong-koo and his only son Eui-sun, CEO of Kia Motors, will tolerate the scenario,” a dealer said.

Meanwhile, there are already signs of change at the top of the chaebol. Last week, the WSJ [sub] reported

Hyundai announced Friday the retirement of Chief Executive Yang Seung-suk, who ended a nearly three-year stint in the post, during which time the car maker outpaced the competition in one of the industry’s worst downturns. In March, Lee Hyun-soon, Hyundai’s head of research and designer of the company’s first engine, also retired abruptly.

Hyundai’s ability to absorb such high-profile departures is rooted in a complex management structure built around Chairman Chung Mong-koo, the son of the company’s founder. Its day-to-day operations are handled by a suite of executives, the most visible of which in recent years has been Mr. Yang, known outside of South Korea as Steve Yang.

Mr. Yang was chiefly responsible for nondomestic operations and global marketing for Hyundai, which, with its affiliate Kia Motors Co., is the world’s fifth-largest car maker by unit sales.

In a statement, Hyundai said Mr. Yang’s duties would be divided among two executives, Mr. Chung and Kim Eok-jo, but neither would immediately receive the CEO designation.

The consolidation of power around Mr Chung, and the rise of executives with strong ties to Kia (which Mr Chung personally oversees), caused Wards Auto [sub] to report

Some analysts say Kia has outperformed Hyundai in the domestic and some overseas markets, speculating the two executives initially were brought over to provide a spark.

Is Kia coming into its own? Certainly US sales of the brand are nowhere near Hyundai’s blazing growth, but globally the balance of power appears to be shifting. We’ll certainly be keeping an eye on this emerging sibling rivalry.

 

 

Get the latest TTAC e-Newsletter!

28 Comments on “Sibling Rivalry Watch: Is Kia Outshining Hyundai?...”


  • avatar
    Educator(of teachers)Dan

    Interesting developments. FYI the profile pictures at the top of this article made me realize the similarity of the profile of the new KIA Optima to a 2005 Pontiac Grand Prix. KIA must be doing well, I was on the phone with my father this week and he mentioned he was thinking about buying a car. “Oh, really?” I said.

    “Yeah,” came the reply, “I’ve been thinking about a KIA.” Coming from a man that has only driven domestic his entire 56 years on the planet I was too stunned by that revelation to even ask him which model he was considering.

    • 0 avatar

      Wow… yeah, you’re right about the similarity to the Grand Prix. The greenhouse is damn close.

      I’ve been surprised with the responses I get when I mention my intent to replace my Mazda with a Kia Optima. I was expecting most to laugh or deride that choice — but most have responded with “yeah, those are nice… Kia sure has come a long way!”

      And they have.

  • avatar
    stuntmonkey

    One day we’ll look back on Hyundai’s fluidic sculpture the way we look back on the side-cladding on Pontiacs and flame-surfacing on BMW’s.

    Back in the day, Chris Bangle was at pains to show that the E90 3-series looked more ‘modern’ than the E46… which was true. However, one only has to seethe difference between the new 5-series and the old to see how long that lasted. Design language that is with the times is necessarily design language that is of the times… when time moves on, the era is past. Cubism, surrealism, expressionism… they were all shocking and modern for their day as well.

  • avatar
    VanillaDude

    I wish American manufacturers had this problem today.

    They used to. Plymouth and Dodge had intense rivalries. GM’s divisions used to squabble over everything.

    The problem isn’t car style. The problem for Hyundai is that Kia is the new kid on the block and the market likes what it sees from the new kid. The market knows Hyundai. They want something as good as a Hyundai that isn’t a Hyundai – and that would be a Kia, right?

    Not a problem, really. That is, unless it causes management to think it has a problem.

  • avatar
    johnhowington

    if i recall the sonata is crushing the optima sales. too bad really, i really like the retro dash style of the optima.

    • 0 avatar
      bd2

      While the Sonata will likely continue to outpace the Optima in the US, the gap in sales will close once US production (which just started) gets the supply of Optima to higher levels.

      Previously, there was only Korean production of the Optima which limited the monthly allotment to the US to around 6,500.

      The diff. is that Kia has been swiping up all the European design awards.

      But as noted below, actually prefer the interior/dash design of the Sonata over the Optima (albeit the Optima has better materials).

      As already stated, Hyundai appears to be going with a more toned down version of its “fluidic sculpture” design language – as seen in the new Azera (which is already a big seller in Korea) and with the toned down the grill of the Sonata for its mid-cycle refresh.

  • avatar
    upontop

    While I prefer the exterior of KIa Optima over the Hyundai Sonata, I really like the Hyundai’s interior. I think Hyundai’s interiors are more stylish and put together better than Kia’s. As for Hyundai’s fluidic sculpture design language, I don’t think it was as successful on the Sonata as it is with the Tuscon and the Elantra. Both the Tuscon and Elantra are very smart looking cars but the Sonata is a little overwrought. The styling of the European version of the Sonata is by far the better looking automobile.

  • avatar
    Robert Fahey

    Kia stock: http://markets.ft.com/research/Markets/Tearsheets/Summary?s=A000270:KSC

    Hyundai stock:
    http://markets.ft.com/research/Markets/Tearsheets/Summary?s=A005380:KSC

    Kia is the mover.

  • avatar
    Jack Baruth

    I think the Optima is gorgeous and the Sonata is misshapen. Same goes for the Forte/Elantra and probably the Rio/Accent.

    • 0 avatar
      psarhjinian

      The Elantra is about as good as it gets and is at least not so plain as the Forte**, but yes, I agree. Especially on the Sonata, which is a ugly, ugly car in my opinion.

      ** Sedan. The coupe is what the Civic wishes it looked like.

      • 0 avatar
        geozinger

        I would agree with that assessment. As provocative as the styling of the Sonata is now, I think in several years it may be seen as less than graceful.

        I was a fan of the previous Sonata, but the Optima seems to have taken over that line of styling.

    • 0 avatar
      slance66

      Agreed. The Optima and Forte are great looking cars. The Sonata is still nice looking, but not as nice. Are the Kia interiors as good?

      I’ll add that the grill/front end treatment from Kia is superb across the line. It looks good on all the cars and SUVs and has become instantly recognizable. It may be the best automotive front end design identity other than the BMW twin kidney. It really calls out the immense mistake Acura has made (and in my opinion the over-chromed Ford horizontal bar grille as as well).

      • 0 avatar
        jpcavanaugh

        I am in complete agreement with you on the front end design. My wife and I were recently cross-shopping the Hyundai Tuscon and the Kia Sorento. The Tuscon was conservative while the Sorento was alluring. But I tend to buy cars by the pound and am the proud new owner of a Sedona minivan.

        That new nose is on the Sedona too, and fixed all that was ever really wrong with its styling. 1 week and 800 miles, so far so good.

      • 0 avatar
        tankinbeans

        @Slance

        Re: Kia interiors.

        My experience with the interior in the seemingly derided Forte, of which I own a rather nice one in black, is that it is pretty good. Yes the upholstery could be a little better and some of the plastics on the door scuff fairly easily, and the “piano black trim” around the shifter and climate controls kind of swirls out pretty quickly and doesn’t come back to the new look. All that being said, I’m not unhappy with it. I’m not the kind of person that will carp about things that don’t matter in the end.

        Kia seems to have put their money towards the important bits and that’s all that counts, to me.

        I happen to really like the baby Audi look given by Schreyer. I just wish I could have gotten mine in that really nice Corsa Blue, but that’s only available on the SX. Small things…

    • 0 avatar
      don1967

      I agree, except for Elantra/Forte. The Elantra manages to make the Forte look dated, without succumbing to the Sonata’s excesses or the Accent’s dorkiness. It seems to have the best proportions for this “fluidic sculpture” exercise.

      • 0 avatar
        bd2

        The Forte Koup is still a looker; the Forte sedan was boring from the start (not a good thing when the smaller new Rio sedan has the sleeker greenhouse/roofline).

        But the new Forte is just around the corner and gets the sleeker greenhouse/roofline treatement as well.

  • avatar
    dvp cars

    …..having to decide which one of your best selling divisions to prioritize is a dilemma the rest of the auto world’s boards of directors would kill to have. Sounds like a friendly (and hugely profitable) father-son rivalry in this case. Wonder if there are any other CEO/Board Chairmen out there with overachiever kids ready to take Pops on with a new brand (and using his money).

  • avatar

    I have no clue whether this is a national trend or not, but here in New Mexico (and El Paso, and Arizona) dealers seem to have no problem selling the higher-line EX and SX Optimas. The only ones still on the lots are 2011 base models, most with manual transmissions; the 2012s are still a month or two off.

  • avatar
    Davekaybsc

    I think once people’s memories completely fade away of the Sephia, Sepctra, and original Sportage, KIA will be a more significant force in this market. KIAs are pretty solid and very attractive NOW, but not that long ago they were complete trash.

    If Hyundai wants to continue the very similar product and pricing structures between the two brands, they need to seriously work on differentiation. Hyundais should target Toyota and Honda, and KIA should target Nissan and Mazda. Make the KIAs *genuinely* sport focused to back up their aggressive looks. Right now it’s basically all show. The Genesis coupe should probably be a KIA.

  • avatar
    don1967

    Is it any surprise that New Hyundai’s first major challenger would be Kia? This is the inherent risk of marketing to early adopters… they’re always ready to leave you for the next hidden treasure.

    The benefit for Hyundai is what gets left behind; a more Toyota-like customer base that has been purged of all the transients. That spells higher margins, and an official end to underdog status.

  • avatar
    Canandovq

    I´d like to know how deep these two automakers share production and why Hyundais score much better in JD Powers surveys.

    • 0 avatar
      don1967

      Many powertrains are now common to both brands, and the 2012 Santa Fe is actually assembled by Kia alongside the Sorento. Fairly tight sharing.

      I would speculate that the JD Power differences are mostly dealer-related, but perhaps Michael can comment on this.

  • avatar
    claytori

    Hmmm. Seems like Archie’s choice: Betty or Veronica.

  • avatar
    rp2s

    I’ll stick with my 2012 Hyundai Veloster. It is purely a Hyundai Fluidic Sculpture design, which I easily chose over the Honda CRZ. I do like how Kia has used that basic design architecture though out it’s entire lineup.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India