Hyundai and Kia’s Rise from Bargain Basement Brands to Import Mainstays
These scrappy Korean manufacturers have come a long way from their “cheap appliance” days to take on bigger fish in the industry.
The parents of one of my childhood friends were (and still are) Toyota fanatics. They had a beige-ish Toyota Camry wagon that I remember in particular because a bunch of us used to cram into it for lunch during high school. I also recall my friend’s ire when one of our classmates backed into it in the parking lot. I don’t think she ever forgave him.
In the mid-80s in the Midwest, “buy American” was still very much a presence. Many looked down on Toyota models and eyed the company with suspicion even though it had been more than a decade since the Corolla started selling like the proverbial hotcakes after its launch in 1968. They paved the way for Korean carmakers Hyundai and Kia, which launched in the U.S. in 1986 and 1994, respectively, but the two newer brands still had a mountain to climb. I wanted to know how they got to where they are now, so I asked a couple of analyst friends to weigh in.
“One thing to keep in mind is that there was a real fear of losing jobs,” IHS Markit analyst Stephanie Brinley told me via phone. “Toyota faced backlash from the UAW and I don’t think that has been as big of an issue for Hyundai and Kia. Partially because times have changed, and over time, Honda and Toyota have brought a lot of jobs here. It didn’t work out the way people were afraid it would in terms of job loss.”
On top of job anxiety, Hyundai and Kia weren’t known for high-quality or attractive vehicles then, ensuring their status would stay at the bottom of the ladder for a while. I asked AutoPacific head analyst Ed Kim if the initial jeers and snobbery toward the brands were unwarranted.
“Hyundai and Kia were the butt of jokes during their early years in this market, and their poor reputation wasn’t undeserved,” Kim says. “Early models in the U.S. market were poorly built, unreliable, and had little emotional appeal. They were cheap appliances for people that cared more about price than anything else, even durability and reliability.”
A turnaround was on the horizon, and in the late 1990s Hyundai made big strides in quality and introduced the then-landmark 10-year, 100,000-mile powertrain warranty to prove it. Kia followed not long after. This helped both brands get on consumers’ radar, though the vehicles themselves still had some design work to do.
“With Hyundai and Kia’s development, they figured out early on that cheap wasn’t getting them anywhere,” Brinley says. “They shifted the focus to providing more value than someone might expect, offering a $20,000 car with more content; I think it’s worked pretty well for them because they have been artful and careful about the materials they used.”
When the pandemic hit last year, Hyundai was one of the first to offer flexible payments during the recession, even deferring payments for several months if they had lost their job. That kind of outreach made it easy for consumers and generated goodwill for the brand. An advertising and image overhaul helped, too.
While the Soul hamsters were memorable (and somewhat odd), the brand's image didn’t resonate as much as Toyota’s “You asked for it, you got it” and “Oh what a feeling” campaigns from the ‘70s and ‘80s. That's changing too, and last year Hyundai debuted commercials with celebrities using heavy Boston accents and “pahking the cah” with the Sonata's self-parking feature. From where I sit, the current-gen Sonata is on par inside and out with some luxury sedans and the Palisade is arguably one of the best values in its class.
“Through much of the 2000s, Hyundai and Kia had a laser-like focus on achieving Toyota-like durability and reliability, and that also translated to vehicles that were clearly using Toyotas as literal benchmarks for many of their products,” Kim says. “Toyotas of the time weren’t particularly inspired either; they were consumer durables that sold to people who didn’t really care about cars as long as they started every time and gave them years of trouble-free service.”
In 2020, Hyundai America sold 622,269 total vehicles and Kia sold 586,105; still far below Toyota’s 2.1 million in the U.S. market. If you take a closer look at what they’re selling and design improvements, the numbers don’t tell the whole story. Kia’s Stinger opened the door to the idea that the Seoul-based automaker could bring the power, and the Telluride SUV impressed a whole lot of automotive media outlets and buyers.
Getting to that point took a major shift in strategy for both companies, especially on the SUV front, because they were riding the wave of the popularity of sedans in Korea. They called in all of their chips and pivoted fast, hiring former BMW head Albert Biermann to run all of global R&D for Hyundai, Kia, and Genesis. The melding of Korean practicality and European finesse turned out to be a smart move for the brands. As this took shape, Kim says, Hyundai, Kia, and Genesis models became the benchmarks, a far cry from the days when the automaker longed to be like Toyota.
“I think consumers don’t realize how much tech is in these vehicles; it’s even more of a surprise than the warranty,” Brinley says. “The depth of the product line is also impressive. Aside from a full-size pickup, it’s a full-service brand.”
Emboldened by its success, Hyundai Motor Group is running straight ahead, no longer content to be a follower. Instead, it’s finding its own groove. I mean, have you seen the spaceship-like Hyundai Staria minivan?
“Hyundai has become a real innovator in terms of technology, most recently in electrification and infotainment, and the three brands have some of the most distinctively styled designs in the business,” Kim says. “We can expect future Hyundai, Kia, and Genesis models to continue setting standards as the company aggressively moves towards electric vehicles.”
With upscale Genesis brand and EV subsidiary Ioniq adding depth to its portfolio, it looks like the Hyundai Motor Group is already on its way to the next rung of the ladder. If they can continue to come up with vehicles to match the value of what they're selling now (and stay out of recall trouble) I expect more surprises to come.
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