• Feb 13, 2011
Hyundai Motor America President and CEO John Krafcik believes that some automakers are starting a price war, which would be an unwise move that focuses solely on short-term sales.
General Motors had strong sales in January 2011, but its 23-percent gain was due to increased incentives and price-cutting. After GM made its move, Toyota followed suit.

Krafcik says that Hyundai, whose incentive spending is among the lowest in the industry, has no plans to join in this game. Heavy incentive spending leads to sharp up and downswings in an automaker's accounting ledger. Hyundai sales rose 24 percent in 2010 and Krafcik expects to see improvements in 2011. While some automakers are fiddling with the radio, Krafcik is paying attention to the road in front of him.

[Source: The Economic Times]


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  • 42 Comments
      • 3 Years Ago
      Smart move by Hyundai. They have a great product line up right now and to be blunt the price point on most of their line if up if not all of it is spot on and very competitive in my eyes.
      While yes incentives at times do get people in the door it does skewer the numbers and profit margin. Especially when you get into the +7k worth of rebates/incentives territory. It gets even more convoluted when you have them be for only one month. On the books you'll see a sales spike but the following year your numbers will be way lower if the incentives and rebates are not there to help the automaker out.

      • 3 Years Ago
      Instead of cutting price, how about adding content?

      The Veloster Turbo had better have a torque sensitive front differential [and 188hp, 173ft-lbs]
        • 3 Years Ago
        Hyundai/Kia has been price cutting while adding content for years.

        My 2006 Sonata had TSC/ESC standard while other cars you had to spend $5k more on a higher model to get the same features. And let's not forget the full side curtain airbags - Hyundai did them on the Accent and Sonata way before the idea of more than a couple airbags was popular.
      • 3 Years Ago
      In Canada; Hyundai still has enourmous rebates hidden in their financing rates. They give that to the banks they deal with, but will not usually hand it over to the customer if they pay "cash". That is why almost all Hyundai sales are financed -- if if the people could have paid cash.

      I am not sure if a company is allowed to "suggest" that it's competitors "adjust" their pricing upwards .. thought there was a ethical or legal reason they cannot do that.
      • 3 Years Ago
      @Dr Greenthumb: Whoa whoa whoa... no one bad mouths the Nissan Z*. It is most certainly not a fad car...

      (*except the 350Z... screw that thing)
      • 3 Years Ago
      Wise words.
        • 3 Years Ago
        John H. I've read elsewhere that incentives at GM over the past three months, were used to flush the 2010s out. The truth will be known over the coming two months.
        • 3 Years Ago
        No, it's pure marketing BS.

        The average GM car sells for $32k, after $3k in incentives (9%).

        I think the average Hyundai/Kia sells for less than $20k, after about $2k in incentives (also about 9%).

        If Hyundai can get GM to cut their incentives, especially with GM releasing competitive small cars, then the GM cars proportionally cost more, are less competitive, so Hyundai cars look like a better deal.

        Hyundai is clearly scared of the new Cruze & Verano, etc. because these are competitive cars coming right into Hyundai's market.
        • 3 Years Ago
        GM also has Cadillac and a lot of higher sticker Chevrolet's (Camaro SS, Corvette, most of their trucks/SUVs) to raise that average transaction price. The only cars that come to mind for Hyundai/Kia that are about $30k are the Genesis (sedan, or well optioned coupe) and the Kia Borrego. And we know the Borrego doesn't sell well, so that certainly isn't going to help their average transaction price.
        Carlos
        • 3 Years Ago
        @John H

        Good, let Hyundai be scared of the new Cruze, it will mean a better Elantra in the future. Competition improves the breed.
        • 3 Years Ago
        speaking of Mustang and Camaro it would be great if Hyundai responded by either adding a turbo to the genesis or making the next generation fit a V8. They seem content to compete with the V6's which they do well but wouldn't it be nice to have the option to compete against the V8s too. Ford could respond to a turbo by using their Ecoboost...
        • 3 Years Ago
        Apparently the Borrego was killed off, Rondo style.

        And then there was one... until the Equus comes out.
        • 3 Years Ago
        @Carlos: totally agreed. The new Camaro is giving us some of the absolute best Mustangs we've ever seen. If GM gets Ford, Hyundai, etc to raise their game, I'm all for it.
      • 3 Years Ago
      Thumbing throught todays Chicago Tribune, there is a full page add for a Hyundai dealer
      offering $1500 and $2500 factory rebates with 0 down and 0/60 financing on all, plus $6197 off MSRP on one model. What kind of crap is this guy feeding? Klink is right. The wong is artificaly kept low the same way the Japanese manipulate the yen.
      Hyundai has never managed to make it above the mid level in quality and Kia fares worse. Making matters worse is that phony warranty that's non-transferable to the second buyer helping in part to keep resale and trade-in value some of the lowest in the industry.
      Quality? Yeah right. Look beyond the glitter.
        • 3 Years Ago
        Please know your facts before speaking. I have personally met Mr. Krafcik and he's one of the classiest men I've ever met. And about Hyundai's warranty, if you read the contract, you will know that it doesn't transfer. But that's not a phony warranty. People just need to start read and try to understand what they are buying.

        For example, the bumper to bumper warranty doesn't last as long as the power train warranty. For example, some people may complain that the 100,000 mile warranty isn't valid because it doesn't cover the brake pads or brakes. They should read what differentiates one warranty from the other. Car companies are usually very descriptive on defining these terms. Please know what's phony before making stupid accusations.
      • 3 Years Ago
      This guy is funny. The way a talk means that Hyundai forte is not quality, instead price.
      If Hyundai built betters cars than Toyota, Honda GM, then price is irrelevant.
      If they are so confident about his products raise his price, make Hyundai more
      expensive than Honda & Toyota and see what will happen.
      • 3 Years Ago
      Hyundai doesn't need incentives (or large ones) because their sticker prices are more in-line with their true market value.

      The reason for the large incentives is that the MSRP of GM and Toyota cars is greatly overvalued. Have you seen the retail on the new Cruze? Absurd for what you get. GM is notorious for having HUGE markup on the sticker in order to give the dealer more opportunity to soak you. They MUST give incentives to bring their cars into competition with everybody else's prices. This is nothing new.
      • 3 Years Ago
      THIS HAD TO BE SAID AGAIN


      revaholic
      11:12AM (2/13/2011)
      Uh, does anyone else think that this is hugely ironic coming from Hyundai, a company whose strategy for decades has been to undercut their competition's prices?

      Reply
      ↓↑report
      • 3 Years Ago
      A redesigned Camry goes on sale this September it's going to need incentives to sell so late in its in lifecycle. A new Tacoma and RAV4 are also expected later this year. Of course Hyundai doesn't need incentives the Elantra and Sonata are new.
        • 3 Years Ago
        @spin cycle

        that's one thing Pete DeLorenzo's been talking about, Hyundai (USA) has been talking way too big, too early. So far their initial quality looks ok, but they're going to need to get a few years under their belt so we can see how their long-term reliability shakes out. It'd suck for them if their mouths are writing checks that their products can't cash...
      • 3 Years Ago
      Uh, does anyone else think that this is hugely ironic coming from Hyundai, a company whose strategy for decades has been to undercut their competition's prices?
        • 3 Years Ago
        In the past, Hyundai undercut everyone's prices simply by selling the most basic, cheaply built, crappy cars with pretty much zero creature comforts & features. It wasn't due to tacked on incentives & such, & that's what he's talking about. Their current lineup is actually huge on quality & value, but their low prices aren't due to incentives. Right now most of the other manufacturers are playing catch-up in the value department.
        • 3 Years Ago
        I don't think you're understanding the meaning of incentives and short-term price cutting.

        Short-term price cuts and incentives momentarily increases demand, giving a short-term boost to sales. However, if you average the sales over a five-year period, the increased sales would be essentially negated by the decreased number of people shopping for cars. So essentially a manufacturer gave up revenue in the longterm to spike sales in the short-term, essentially raising their opportunity cost and transaction cost in exchange for better short-term numbers.
        • 3 Years Ago
        Hyundai has Won help from the Korean government.
        • 3 Years Ago
        @mantamanta. Hyundai still has thousands of engineers and support personnel employed in Korea at a price advantage to NA (and other) OEMs. They get a price advantage simply from that. And they also benchmark EXTENSIVELY. Good for the consumer, but they are still leaning on development other OEMs had to pay for. So it's easy for Krafcik to say all of this given who he works for, but it doesn't tell the whole story IMO.
        • 3 Years Ago
        I think you all are missing the point. Hyundai of today is not yesterdays Hyundai and the way Hyundai is doing business today is why they are ahead of their competition, like them or not. Other automakers could learn a lot from Hyundai esp Chrysler who needs more then just good car models. they need to learn to run their car business better too.

        I think Hyundai / KIA has the best models of all the automakers with only ford being as good. Ford and Hyundai /KIA has really changed they way they do stuff and that is why those two car companies are more then fine in this economy.

        I think GM is starting to become the next media blitz like Hyundai and ford has been for the last few years while toyota is just slipping further down the ladder. Honda just seems stuck which is as better place to be then where toyota is.
        • 3 Years Ago
        Hyundai's cars are less expensive for a few reasons. The shipping company they use is Hyundai Heavy, so shipping costs are negligible, the robots used in manufacturing are built and owned by Hyundai, the steel comes from a steel mill bought by Hyundai, etc etc etc. They're vertically integrated, and on top of that look at the invoice to msrp gap on a Toyota or Dodge or anyone else compared to Hyundai. Hyundai on average has ~$200-1200 in markup max while their competition is marking their cars up $3000-5000.

        They're just doing it right.
        • 3 Years Ago
        @tribute: Subaru doesn't care about the "price war" (which is really just BAU for GM & Hyundai). Subaru is production-limited, so they don't need to discount, so their average incentive is like $500 (2%). It's why Subaru ads feature things like making a charitable donation directed by the buyer.
        • 3 Years Ago
        Hyundai incentives are only "low", because their transaction prices are low (among the lowest in the industry).

        When Hyundai incentives are compared with transaction prices, they are basically giving the same discount that GM does. Not as good as Ford, not as bad as Chrysler.
        • 3 Years Ago
        @Franz: In the past, Hyundai also relied heavily on cheap South Korean labor rates, which have grown closer to those of their global competitors in the past few years... enough to make building cars in the US make fiscal sense for them. They were evidently smart enough to plan for the erosion of their price advantage with better, more appealing product, to shift the focus away from the "discount brand" they once were.

        Krafcik is smart if he never lets his company get addicted to incentives, whether it's to move slow-selling inventory or to capture a sales title.
      • 3 Years Ago
      Wow, hyundai CEO tells public that he doesn't want to haggle for cars because it's bad for profits....

      In other news, there is a war in afghanistan.

      PS I would also like to point out that their base-price vehicles are seriously under-equipped.
        • 3 Years Ago
        There are people like me who don't want all the gizmos, and go for the cars without them and save money.
        If it was up to me, I'd opt out of ESC, ABS other crap that are required in new cars now.
        • 3 Years Ago
        ESC/ETC are incredibly useful here in Wisconsin. =)
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