Hyundai and Kia Find the Sweet Spot in U.S. Market

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Kim Kyung-Hoon / Reuters / Corbis

A South Korean looks at a Hyundai car in a Seoul showroom

While other automakers are closing plants in the U.S., Kia, which is controlled by South Korea's Hyundai Automotive Group, is preparing to open a brand-new assembly plant in West Point, Ga., southwest of Atlanta. The $1.2 billion, 2.2 million–sq.-ft. plant will begin producing Kia vehicles for the retail market next month. Up until now, Kia had imported 100% of its vehicles.

The South Korean automakers are coming on strong. Kia is about to up its market share for the 15th consecutive year, and the combined sales of Hyundai and Kia increased 26% in September even as industry sales overall softened after the cash-for-clunkers program ended. They also are two of three brands reporting a sales increase through the first three quarters of 2009 — Hyundai's sales are up 1.3% while Kia's have increased 4.6%. The South Koreans have gained more market share than any other automaker this year, and their combined market share is now closing in on that of both the Chrysler Group and Nissan.

John Krafcik, president and CEO of Hyundai Motor America, is now able to do something rare for automakers: boast. "U.S. car buyers have responded in record numbers to high-quality, award-winning Hyundai products," he says. More significantly, praise is coming from Consumer Reports, J.D. Power & Associates' Initial Quality Survey and a panel of journalists at the North American International Auto Show in Detroit who named Hyundai's Genesis the 2009 Car of the Year.

Dave Champion, director of vehicle-testing at Consumer Reports, says both Hyundai and Kia have developed a genuine appeal for American consumers seeking affordable transportation. "Their buyers aren't worried about name-brand image," says Champion, who notes Hyundai's 10-year, 100,000-mile warranty is a winner. Kia's warranty of five years or 60,000 miles, and 10-year or 100,000-mile power train, isn't as broad, but it is still generous by industry standards.

"I think Hyundai has gotten a lot of mileage out of the warranty. I consistently prefer the Kia models, but the Hyundai warranty is hard to resist," says Rebecca Lindland of IHS Global Insight. Another telltale sign of the growing popularity of the South Korean brands: Internet screen views of Kia products have increased 283% year over year, the largest of any mainstream brand, according to a study by AutoTrader.com. Views of Hyundai vehicles also increased substantially.

The new Kia plant in Georgia will employ 1,200 workers and aims to build 60 vehicles per hour. The first vehicle out of the plant will be the 2011 Kia Sorento, a midsize crossover vehicle that combines features from a passenger car and a sport-utility vehicle. "Creating stylish and safe vehicles loaded with value is a core philosophy for the Kia brand," crows Byung Mo Ahn, chief executive of Kia Motor America.

Kia's Georgia plant is also scheduled to get engines from a motor plant Hyundai opened last year near Montgomery, Ala. In fact, the West Point site was chosen by Kia in part because of its proximity to Hyundai's manufacturing facility, creating efficiencies for both companies as well as their suppliers, notes Kia spokesman Alex Fedorak. Suppliers are expected to create as many as 7,500 jobs in an area hard hit by the shutdown of local textile mills.