Hyundai Offers a $1.49 Price Lock on Gas

It's the Korean carmaker's latest effort to seize share in the depressed U.S. market after earlier this year assuring buyers worried about their jobs

By David Kiley

Suddenly gasoline is in the headlines again as attacks on Nigerian oil pipelines and the summer driving season cause energy analysts to predict higher prices at the pump. That could pay dividends for Hyundai. On Tuesday, June 30, the Korean automaker is launching a summer promotion that guarantees buyers of its vehicles one year's worth of gas at $1.49 per gallon.

The gas giveaway comes on top of other offers that have helped Hyundai boost its share of the U.S. auto market from 2.9% to 4.2% so far this year. Earlier this year, Hyundai launched an "Assurance" program that guarantees that buyers can walk away from a new-car loan if they lose their jobs, with no adverse effect on their credit rating. It already offered one of the most generous warranty programs in the industry. Hyundai also bought a series of extremely high-audience TV ad buys, such as the Super Bowl and the first ad spot on CNN after then-President-elect Obama's election night acceptance speech.

Hyundai is trying to increase its market share amid the recession, as Detroit automakers regroup and even Japanese companies are hurting. It is making similar moves in China, where its share rose to 7.3% from 5.3% a year earlier. "Hyundai appears to be using the difficult industry situation as a good opportunity to vault into the league of major players in two or three years," says auto analyst Sokje Lee at brokerage Mirae Asset Securities in Seoul. "Taking advantage of a weak Korean currency, it is spending heavily on marketing."

Gas prices were already expected to rise above $3 a gallon this summer, before the violence in Nigeria that forced Royal Dutch Shell (RDSa) to close its primary oil field on Monday. Crude oil prices for August delivery climbed $2.33 a barrel, to $71.49, on the New York Mercantile Exchange. The Associated Press reported that the average price of a gallon of regular unleaded gas fell by four-tenths of a cent, to $2.639, according to AAA, Wright Express, and the Oil Price Information Service. The U.S. imports almost half of Nigeria's production of light crude, which is the oil used in gasoline refining.

Driving Web site and showroom traffic

"A guarantee of such a low gas price could have a great psychological effect on car buyers, and it certainly will increase hits to Hyundai's Web site and create more interest in researching Hyundai, which is really the point of this promotion," says independent marketing consultant Dennis Keene. "Very few people actually take advantage of these headline-grabbing programs, but [the deals] stimulate Web site and showroom traffic."

Hyundai's Web site traffic is up 18% this year, according to the company. Its U.S. sales are down 7.9% through May of this year, but that's better than the industry's overall 30% drop.

Hyundai's research showed that nearly 40% of potential new-car buyers were staying out of the market specifically because of uncertainty around future gas prices. Chris Perry, director of marketing communications at Hyundai, says: "Our programs are designed to address consumer needs, the ones they are talking about around their kitchen tables." Indeed, while Hyundai's Assurance program increased Web interest when it was launched last January, fewer than 10 buyers have had to take advantage so far, the company says.

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