Brand perception holding back Hyundai

HYUNDAI Motor Company Australia (HMCA) is hoping the arrival of its first N high-performance car, the i30 N hot hatch, as well as the upcoming launch of a range of Ioniq electrified vehicles, an emissions-free Kona and the hydrogen fuel-cell Nexo, will boost brand perception and help lift the South Korean car-maker from third place to second on the Australian new-vehicle sales charts.

Last year, Hyundai finished with 97,013 sales, down 4.5 per cent on 2016 and 19,336 units behind Mazda on 116,349. It was also well off the pace of clear market leader Toyota, which racked up 216,566 new registrations.

However, HMCA has had a strong start to the year – up 10.4 per cent to the end of February – and company chief executive JW Lee told GoAuto this week that ongoing sales and market share growth were expected as Hyundai improved its brand image – not as it looked to gain a competitive advantage in well-worn areas such as pricing.

“My personal hope is to take over Mazda within three to four years – as long as we have a ute, maybe we have quite a good opportunity to take over Mazda – but currently I don’t want to compete with Mazda in these ‘red oceans’,” Mr Lee said in an interview with GoAuto at the i30 N launch in Albury this week.

“‘Red oceans’ have some fierce competition in terms of price or promotional items, not that much difference between the companies, everyone’s competing in the same areas, not that much strong differentiation.

“We can differentiate ourselves with other competitors, these are the ‘blue oceans’ to Hyundai.

“For a time, the customers’ perception to our cars have been affordable cars.

So as long as customers keep that perception of our company, it’s quite difficult to change our brand image.

“Sure, we were an affordable car company, but we want to provide some real value to our customers, not only a price point.”

Mr Lee revealed that bringing in a halo product such as the i30 N would add value to the brand, not just to customers externally, but also lift the brand morale for those already working under the Hyundai umbrella.

“i30 N is really going to give, I hope, a really good halo effect to the entire brand,” he said.

“That’s why we have conducted some very intensive training sessions to all our sales forces because this is not a volume model.

“Training 600 people costs a lot to us, but this is not a matter of cost.

Internally, I hope, everyone on our sales force will have strong confidence on our products. Maybe our customers will be aware of the importance of the brand, but I think internal confidence is more important than our customers’ confidence in the initial stages.

“Once all our internal staff and dealer staff … understand the importance of our brand, then they can give the confidence to our customers, so that’s why we invest a lot to give some good training to all these internal staff.

“I believe building up this brand image is going to make a really big deal to us.”

In addition to N products, which will expand to include the i30 N Fastback later in the year and a dual-clutch automatic version late next year, Mr Lee said the upcoming wide-market rollout of electrified models will also give Hyundai an edge.

“We wanted to share some of that halo effect to the entire brand with this i30 N launch, but not only i30 N, my vision is to introduce more eco-friendly cars to the Australian market,” he said.

“Kona electric car, Ioniq electric car plus plug-in and hybrids, and the Nexo fuel-cell vehicles, these eco-friendly cars are going to take a very important role in building up our brand image as technology-driven.

“So maybe by 2021, or 2022, our company is going to take a strong leadership position in these eco-friendly cars.”

Mr Lee revealed that i30 sales last year performed below his expectations, tallying 28,780 sales (down 23.8 per cent year-on-year) despite a new-generation launch in May.

While the i30 finished last year third behind the Toyota Corolla (37,353) and Mazda3 (32,690) in the sub-$40,000 small car segment, Mr Lee is adamant the higher price position compared with its predecessor is justified by boosted standard equipment and build quality, and that “we can be number one”.

Similarly, the launch of the Kona in the booming sub-$40,000 small SUV segment has not meet Mr Lee’s hopes with just 4698 registrations tallied since October.

“Last month we sold around 1000 Konas,” he said. “The customer is not much aware of the new name Kona – in my view, it takes some time to spread our Kona name amongst our customers.

“We have to sell maybe 1500 cars per month … 1500 per month is actually the highest number in the small SUV segment.

“I’m very proud of our small SUV Kona in many aspects. I’m aware of many areas we need to change or improve to satisfy customers, but our new Kona is really a very strong contender in the segment.”

When asked what could be done to improve Kona’s sales performance, Mr Lee said: “Maybe price point, our entry-level price is at $24,500.

“Initially, it was well appreciated by our dealers as well as some customers, but as time goes by customers’ expectations are something different because in this small SUV market, Mitsubishi ASX is a price-driven car, Mazda CX-3 is also a lower price than ours.”

Mr Lee also highlighted the Tucson, which rose 18.4 per cent last year to 23,828 sales and finished just over 2000 units shy of Mazda’s CX-5 – the most popular sub-$60,000 mid-size SUV on the market – as a key-performer for the brand.

Looking ahead to the remainder of 2018, Hyundai also has a new-generation Santa Fe large SUV and Veloster sports hatch coming down the pipe.

However, Mr Lee reiterated his position that pricing Hyundai products down to compete against rivals would not be the way for the car-maker to grow sales and market share.

“I want to really (win over) our Australian customers’ mindset with our performance and quality, not only price point,” he said.

“That’s why I think it will take some time. Maybe if you give some more discounts or some more incentives to customers, maybe the timing will be shorter, but I really want to give some real benefits or values to our customers.

“Maybe customers think that price is the important part to them, but if you give some more incentives or discounts, then what about their residual values, what about the real benefit to customers? “If everything is well accepted by our customers, then we will take over Mazda within quite a short span of time, but I don’t want to compete with Mazda in this ‘red ocean’.

“Once we change our company’s perception then we can enter these ‘blue oceans’ – then we are on our own rules – (and) then maybe we can become number two, or number one in the future.”