Sibling Rivalry Watch: Is Kia Outshining Hyundai?

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.