Hyundai Hopes to Avoid Toyota Trap

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The new family sedan, which Hyundai hopes will eat into market share held by the Camry and Honda's (HMC) Accord, will be the standard bearer of the Korean company's message that it isn't what it was years ago. The mid-size segment, which accounts for nearly half of the U.S. passenger-car market, has traditionally been dominated by the Japanese carmakers, although it's becoming increasingly competitive with strong entries from U.S. automakers such as Ford's (F) Fusion.

The Korean automaker rules out discounts or cash incentives aimed at luring customers away from troubled Toyota. "We have been trying hard to narrow price gaps of our cars with those of Japanese rivals through our rigorous campaigns to improve quality in the past decade and boost our brand power," says Hyundai Senior Vice-President Park Dong Wook. "We will stick to our pricing policy." Both Ford and GM this week made cash offers to new customers trading in used or leased vehicles from Toyota.

Marketing Drive

Instead, Hyundai is revving up its marketing pitch, particularly during big events grabbing many eyeballs. "We'll be big voices in big places," says Vice-President Joel Ewanick, Hyundai's U.S. marketing chief. "We will start with the Super Bowl and a month later in the Academy Awards and a lot of dollars throughout the summer," he says, adding that the Sonata will represent "value proposition" against the Camry and other family sedans in terms of quality, fuel efficiency, horsepower, amenities, and price. The Sonata will be offered at below $20,000.

Hyundai is forking out $160 million this year for the launch of the Sonata alone. Hyundai's Chief Financial Officer Lee Won Hee says the Sonata will give his company another sales boost this year after it grabbed a 4.2% U.S. market share last year, up from just 3% in 2008. Its goal this year is 4.6%, although competition will get tough as automakers recover from last year's slump.

With Toyota obsessed with handling millions of recalls, Hyundai could enjoy an edge in the U.S. Yet Suh at Korea Investment, drawing a parallel between Hyundai's rapid growth and that of Toyota, whose production jumped from 5.7 million in 2000 to its peak of 9.5 million in 2007, warns that Hyundai runs the risk of stretching its management too thin if it keeps putting its foot on the accelerator. "There's a clear lesson to be learned from Toyota," says Suh.

Moon is Bloomberg BusinessWeek's Seoul bureau chief.

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