Hyundai Brand Loyalty: No Secret Sauce, Just Old-Fashioned Virtue
A year ago, people would have looked at the most recent Kelley Blue Book brand loyalty numbers with disbelief -- Hyundai, yes, Hyundai, the Korean carmaker whose poorly made cars were once the punchline to a series of late-night comedy jokes -- has beaten out both Honda and Toyota for the number one spot in the second quarter of 2011. And by a pretty good margin, too.
No magic formula
Hyundai doesn't have a secret sauce. It earned its 52.3 percent brand loyalty (topping Honda at 49.7 percent and Toyota at 47.7 percent) the old-fashioned way: with sharply designed, reasonably priced cars backed by strong 10-year, 100,000-mile warranties (which come with five years of roadside assistance and a trade-in value guarantee). Even if the cars do break down, which isn't often, it's covered. And Hyundai read the market correctly by positioning its cars as, usually, the most fuel efficient in their class.
To get where it is, Hyundai had to move up market. That meant abandoning valuable real estate, such as the "cheapest car in America" title that went with the Accent until the 2012 model. A car that started below $10,000 is now $13,205. But it was well worth it in terms of customer perception and growing loyalty.
According to Jack Nerad, executive market analyst at Kelley Blue Book:
Hyundai has done a great job of broadening the product line and ensuring high quality. The warranties are also a strong factor, because they bring people back to the brand and let them rest easy.Ford has issues
Also topped in the brand loyalty survey were Ford (fourth) and Subaru (fifth). Ford, at 45.4 percent loyalty (just below Toyota), has been pursuing an all-hands-on-deck quality strategy that paid dividends in customer perception. But the company fell sharply in the latest J.D. Power initial quality survey, from fifth to 23rd, because of transmission problems and complaints about its MyFord Touch infotainment system. Note to Hyundai: Don't introduce an overly complicated bells-and-whistles entertainment center without fully debugging it first.
Results like this are a big blow to Honda and Toyota, but hey, the truth hurts. And it also comes out on the test track. Eric Evarts, associate autos editor at Consumer Reports, points out:
We've just seen a lot of Hyundais do very well in testing. They're building some nice stuff. But some of the latest Hondas have gone downhill, especially compared to earlier cars tested. That's also true, to a lesser extent, of Toyota.Currency trading
Evarts says one reason for Japanese quality slumping against Korean makers is likely to be exchange rates that encourage Honda and Toyota to cut corners to protect profitability. It's the same thing that former GM vice chairman Bob Lutz complains about in his new autobiography -- exchange rates killed American competitiveness in the 1980s and 1990s, he says. But now it's the Japanese ox that's getting gored.
And fuel economy is a huge part of this, too. Both the Accent and Elantra achieve 40 mpg on the highway, and the larger Sonata gets 35. Some testers are actually finding that the Sonata can better its EPA rating on the highway (achieving 39 mpg in some cases). The Sonata does use a bit of secret sauce here -- fuel-sipping direct injection technology (which also helps the Accent achieve eye-opening performance).
Other results worth noting: Hyundai sister company Kia was one of two automakers (with Mini) that were up in year-over-year loyalty in the KBB survey. And some luxury brands are up for the quarter, including Audi, Mercedes and BMW (while remaining down year-over-year). This may be, in part, because of slight fuel price drops and positive financial news that allows luxury lovers to "shift back to the luxury brands they enjoyed when the economy was booming," KBB said.
Related:
Photo: Hyundai