She opened the door gently as if she was opening up a really nice Christmas gift and said, “Wow, what kind of car is this?” which surprised me somewhat because it’s not as if she had never seen me in a new test car before. “It’s really flashy,” my mom continued, as she sat down on the rear seat and run her hands across the fresh new leather.” It’s a Hyundai Santa Fe.” I said quite proudly, taking full credit for her obvious joy. “Ay, it’s Korean.” She snapped, pulling her hand back like she had just been bitten by something foreign. “That means its not very good, right?”
Ouch. In one brief, yet fatal statement, she had managed to sum up a multi-billion dollar company’s biggest problem – perception. And it got me thinking.
It wasn’t that long ago when I felt exactly the same way as my mom (not to mention a healthy chunk of the car buying public worldwide) who would see Korean cars like pirated DVDs. Sometimes you get a good copy, sometimes you don’t – but as long as you can make it to end without skipping, you’re ahead. You don’t place any value on the experience as much as you do the result. And because of that, you will always throw your business towards the lowest bidder. I should know – my first brand new car was a Hyundai.
But while that little car served me well, cars are not at all like knocked off DVDs; they are emotional purchases that are as much about going from A to B as an expensive watch is about telling the correct time. This probably explains why Korean cars have struggled to build real brand loyalty.
Back in 1994, when I was ready to take that new car plunge, if anyone could top the deal I carved out at the dealership, I would have signed with them in a snap. A free set of floor mats would have been enough to swing me. Because I admit, I was shopping for a price more than a car. And I wasn’t alone. A vast majority of the compact buying public flocked like seagulls to Hyundai dealerships and quickly made them Australia’s best selling compact car. Until Daewoo undercut them. And then Kia. And then…and so on.
After several passes through the revolving door of brand building, they would soon learn that the problem with any company trying to build loyalty around price is that they are investing in something they will never own, something completely transferable, unlike heritage, passion, performance etc. Simply put, a customer who is price driven will simply remain loyal to the sticker on the windscreen rather than the badge on the bonnet – kind of like that new kid on the block that tries to buy his friends at the playground rather than win them over simply for who he is. No matter how nice he may be, the friendship will never mature properly when you start off on that foot.
Locally, Hyundai had it even tougher than their foreign counterparts. Rather than coming from obscurity, they were forced to start below zero, fighting the gray market and all the damage that they had left behind by riding on the Starex craze, selling them like pearl shakes, only to leave them orphaned. This made it hard for many to warm up to the brand when they launched six years ago despite their flashy showroom, the very attractive pricing and the impressive new product line. Even I couldn’t confidently recommend it – until recently, that is, when I found myself in downtown Seoul and had all my inferiority perceptions shattered, like a toothless redneck finally leaving the 8 square miles where he was born, traveling to Asia and finding out that we don’t live in trees.
If you have ever had any doubts about Hyundai cars, one lap around their ship building facility in Ulsan will clear it all up. It is quite a humbling experience. It puts scale to their operation and makes you think that the entire car manufacturing side of the business was set up solely to make use of the metal filings that fell off the side of the ships during construction. It is that huge.
Hyundai Heavy Industries, the parent company of Hyundai Automotive, is the world’s largest shipbuilding company and enjoys a whopping 40 percent market share. Just try and absorb that for a moment, and when you’re done, think about how those resources affect the economies of scale, bringing down shared costs dramatically. After about two stunned hours of witnessing jaw dropping technology being used in front of me to build the world’s largest ships, I finally understood how Hyundai are able to build a quality product for almost 20 percent less than most of their competitors.
I stood there in utter awe. I remember thinking to myself, while perched up on the sprawling lawn of the magnificent guest home that overlooks the enormous operation below, how much has changed since I drove my little hatchback of the lot. The Flock of Seagulls are no longer cool and the Koreans have successfully leaped over the steepest learning curve of any car manufacturing country to date.
What the Japanese took 20 years to do, the Koreans have achieved in less than half that time, thanks to much faster technology transfer, CAD designs and their already established, extremely modern manufacturing facilities. To think that since releasing the Pony, their very first car in 1976, Hyundai now currently rank as the sixth largest car company in the world, and locally, can boast of having the most dealerships in the country.
After just one week in Korea, I was finally able to understand more about this incredible company. They are huge – bigger than you could ever imagine; their factories are as modern and hi tech as anything I have ever seen in Europe; nine out of every ten cars on the road are Korean, mostly Hyundai; and their latest designs have put many of their Japanese counterparts to shame.
So it should come as no shock to find out that while many car companies are posting record losses, Hyundai is the fastest growing company in the automotive segment. They may have started out competing on price but that was only to get your attention. Now that they have it, and more importantly, have convinced the people that matter that their products are not just equal, but can actually out rank their competitors, (Many models continue to top the JD Power surveys in the US) they have finally managed to build that one intangible that even the sharpest engineers in business cannot fabricate – perception.