Hyundai/Kia Expected To Top Toyota/Lexus in May Sales

Koreans carmakers are rising in sales and respectability

Korean automakers Hyundai and Kia, which are both part of the Hyundai Motor Chaebol (Korean conglomerate) are expected to outsell Toyota and Lexus for the first time when all the sales are counted for the month of May., a leading website for new car pricing, trends and forecasting says that the Korean duo will report sales of between 115,000 and 116,000 in May, good enough for the number three spot behind General Motors and Ford, and ahead of Toyota/Lexus and Chysler/ Dodge/ Jeep.

Toyota/Lexus sales are expected to be down almost one-third from April, as well as down one-third from May of last year. The reason for the drop is a shortage of product due to the impact of the March earthquake in Japan on assembly and parts plants in that country.

"Inventory constraints finally hit the Japanese automakers this month but the recovery in supply appears quicker than first anticipated," said Jesse Toprak, VP of Industry Trends and Insights for "Current inventory shortages and perceived inventory shortages led to the lowest incentive spending in nearly nine years and the lowest selling rate of the year. This is a sizeable speed bump on the road to recovery."

So, is it just because of the earthquake that Hyundai and Kia are rising? Los Angeles based marketing consultant Dennis Keene says the tragedy definitely helped the Koreans, as well as GM and Ford, but that's not the whole story. "Five years ago, we would not be talking about Hyundai or Kia in this way even with the tragic event in Japan giving them this opportunity."

Hyundai Motor America CEO John Krafcik recently spoke with AOL Autos and said that he expected sales of Hyundai to get stronger throughout the year. "We have worked very hard to design our new vehicles around the needs and wants of the American consumer, and the feedback we are getting is that all that work by our team is paying off," says Krafcik, an engineer and former Ford and Toyota executive. "We are holding our own and then some in one-on-one comparisons against our more established rivals...our owners are very happy with out vehicles and they are spreading the word."

The two Korean brands are expected to be the only brands combining for a sales gain versus April. TrueCar expects them to post a 6.1% gain over April, and a whopping 43.4% sales gain over May of 2010. The website is forecasting slight sales dips at Ford and GM versus May, and flat sales versus May of last year.

Hyundai and Kia are managed separately despite being part of the same Korean conglomerate. They do share an engineering and tech center in Michigan. But they market themselves differently, and make independent decisions about design and products.

Honda and Nissan, also impacted by the earthquake, are expected to take hits as well, down 26% and 7.2% respectively versus April.

The overall industry is expected to down more than 8%. Why the dip? TrueCar says that consumer confidence is part of it, but notes that automakers have also been reducing the discounts on cars, which is causing some buyers to stay on the sidelines.

The average incentive spending per vehicle will be approximately $2,017 in May 2011, which represents a drop of 13.1 percent from April 2011 and down 28.9 percent from May 2010.

Why are the automakers lightening rebates? Mostly it is because of the lost production at the Japanese companies due to the earthquake. The auto business is a supply in demand business, and with fewer vehicles on dealer lots to sell, the prices go up.

Bottom Line: The earthquake in Japan definitely helped Hyundai and Kia to pass Toyota and Lexus in sales in May, but the fact is that the Korean companies are attracting many more customers and prospects because of vastly improved vehicles.

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