At this point in automotive history, nobody denies the importance of Hyundai. According to Polk data, the Korean OEM produced almost 3 million light vehicles worldwide in 2003 and we forecast that its output will reach 8.3 million in 2016. That's a growth of 183%, while on the other hand, GM's production is rather stable during the same period.
Part of this growth will come from a brand new factory in Brazil. With an investment of $600 million, Hyundai will start producing a hatchback on September 20 that was developed for Brazil, a country that sold more light vehicles than Germany in 2011, but where Hyundai had just 3.3% of the market. Fiat, the market leader, had a share of 21.8% last year.
The new HB20 – HB stands for Hyundai Brasil and 20 identifies the small platform – was developed in Brazil during the last five years to compete with the Volkswagen Gol, Brazil's best seller for 30 years, and hatchbacks produced by Fiat, Ford and General Motors, among others. Toyota has just entered the segment with the Etios, a model originally created for India. Hyundai will also produce a sedan and a small SUV next year in the Piracicaba plant.
Prices were released on Thursday (September 13) and make the HB20 very competitive. With a 1.0-liter three-cylinder engine, it will cost the equivalent of $16,000 and comes standard with power steering, front airbags and air conditioning. The Gol costs $14,000 but all of these items are optional. Hyundai offers a five-year warranty; Volkswagen offers one year.
The HB20 looks good and has a competitive price. Polk forecasts over 5,000 units will be sold in the last two months of the year. The only obstacle for it to be successful is the structure that Hyundai created in Brazil.
After leaving Brazil twice during the 1990s, Hyundai named a local group, CAOA, to import its vehicles to the country late in 1999. The same group is Ford's largest dealer in South America and imports Subaru to Brazil. Investing heavily in advertising, CAOA made the Tucson and the Azera very successful models and sales went from 35,501 units in 2008 to 77,846 units in 2009 to 111,310 light vehicles in 2010.
A company named Hyundai CAOA started producing light trucks in Brazil during 2007 – now it produces the previous generation of the Tucson as well – paying royalties to Hyundai in Korea. CAOA has most of Hyundai's dealerships also and was in charging of naming other dealers. But the HB20 will be produced by Hyundai Motor Brasil (HMB) and will be available through an exclusive dealer network. It means that a client will not see a HB20 besides an Elantra or a Sonata because the imported vehicles are CAOA's domain. CAOA has requested authorization from HMB for more than 10 dealerships selling the HB20.
Dealerships that will sell the HB20 will have a blue entrance, which will be silver if they sell the imported vehicles or the Tucson. At least the Korean management team will allow any CAOA dealer to service the HB20. Both Hyundai CAOA and HMB belong to Anfavea, the local OEMs' association, and they will share the same booth at the Sao Paulo auto show in October.
This structure seems to be very complicated to the customer, who will probably see Hyundai as just one make, regardless of where a vehicle is produced or who is in charge of selling it. It sounds like Hyundai did a lot of consumer research to develop the HB20, but forgot that the sale process is critical to a model's success.
Posted by Augusto Amorim, Lead Analyst – South America Forecasting, Polk (09.17.2012)