New Cars Accelerate Buzz Over Hyundai, Kia

DETROIT (TheStreet) -- Hyundai and sister company Kia didn't take Car of the Year honors at this year's North American International Auto Show, but it wasn't for lack of trying.

Hyundai came to Detroit with a Sonata midsize sedan whose sales volume increased 113% last year, a new version of the Elantra compact that saw a corresponding 127% overall sales jump and a Genesis full-size that increased sales 30% -- and a $60,000 Equus luxury vehicle, which hit showrooms last month, that stared down Mercedes-Benz and Audi from its position in the Hyundai booth. Even Kia strutted a bit, as the economy automaker's Sportage took home Road & Travel Magazine's International Truck of the year honors.

Though the Sonata finished behind GM's Chevrolet Volt plug-in hybrid for Car of the Year honors, Hyundai/Kia made it quite clear that their value remains even though the Excel compact econoboxes of its infancy are in the rear view.

 Hyundai Equus
Hyundai used this week's Detroit Auto Show as a chance to show off -- among other things -- its $60,000 Equus luxury vehicle, which hit showrooms last month.

"With the Korean manufacturers, the story for a long time was that they gave you the best value," says Charlie Vogelheim, executive editor of Intellichoice. "For the money you spent, you got the most features and benefits from the vehicle."

Last year Hyundai alone sold 540,000 vehicles in the U.S. -- a brand record -- and increased sales nearly 24% over 2009 compared with an 11% improvement from the rest of the industry. Kia, meanwhile, set its own U.S. sales record with more than 356,000 cars rolling off its lots and a nearly 19% sales increase that outpaced the industry's post-Cash for Clunkers comeback.

"The full lineup that the brands now have, relative to previous years, and how they've been able to present themselves over the years with the recent success of the Genesis, Sonata and Elantra is important," says Jeff Schuster, executive director of global automotive forecasting for J.D. Power and Associates. "You're finding where the brand's limits are and what its appeal is, so you can have vehicles that don't fit tightly into the lineup."

That lineup is still expanding. Hyundai gave Detroit a peek at its three-door 2012 Veloster sports coupe (and its 1.6-liter, 138-horsepower engine that reportedly gets 40 miles per gallon) designed to compete with Honda's CR-Z, Toyota's Scion tC and Mini's products. More surprising, however, was Hyundai's inclusion of two concept cars among its offerings, when most competitors shunned the costly show models altogether.

Kia's KV7 concept -- with its gull-wing side doors, Knight Rider-style LED headlights, moving dashboard, front and rear touchscreen computer displays, LED interior lighting and a boxy design reminiscent of Kia's Soul or Nissan's Cube -- seemed closest to production-ready. Hyundai's Curb crossover concept, however, was more faithful to the World of Tomorrow concept cars of a generation before with its swing-out suicide doors, 12-inch central touch-screen display, video screens in back of the headrests and a reflective heads-up display that acts as an MP3 player, video phone and rear-view thanks to cameras that replace the side mirrors.

"Hyundai's concept cars were one of the stories of the show," Vogelheim says. "The show's great for the consumers, but there really aren't people showing concept cars, so the fact that Hyundai shows two -- although they were entry level -- was twice as many or at least more than the zero that most people showed."

Auto-showgoers should have been tipped off to Hyundai's forward-focused plan when it used the event to change its slogan from "Drive Your Way" to "New Thinking, New Possibilities." Vogelheim notes that while the Korean automakers stuck to their value-oriented roots by reminding auto show attendees that Hyundai produces its own steel and is trying to lighten vehicles by reducing waste in steel technology, their willingness to produce costly concept models and branch out into unexplored categories constitutes a big reach for an automaker still in the middle of the pack in U.S. sales. While this strategy is making the rest of the industry aware of the Koreans, Vogelheim suggests the Koreans now need to be cognizant of the changing industry around them.

"I think they'll continue their growth," Vogelheim says. "The one realization you have at the show is that it's a more positive market, but it's a competitive market now that Chrysler is introducing new models, Toyota's not giving up the reins easily, and the new Volkswagen Passat is being built here in the United States."

For a little bit of perspective, Hyundai/Kia's nearly 900,000 U.S. sales last year put it ahead of Subaru's 264,000 and Daimler's Mercedes-Benz and Smart's 225,000 and in the same ballpark as Nissan North America's more than 908,000 units sold last year. Yet the Korean automakers lag well behind Honda ( HMC) and Acura's 1.2 million sales, Toyota's ( TM) 1.76 million mark and Ford's ( F) more than 1.93 million vehicles moved in 2010.

Those 900,000 sales aren't even half of GM's ( GM) industry-leading total of 2.2 million U.S. sales last year, which suggests plenty of room for improvement. While its current slate of vehicles is strong, Schuster suggests Hyundai may need to emulate as well as innovate if it wants to race past some of the automakers ahead of it in the pack.

"There's a good possibility we'll see Hyundai branch these vehicles into other brands, potentially a luxury brand," Schuster says. "I think there's only so far you can stretch the lineup and add additional vehicles that push the limits of the spectrum of vehicles without diluting what the brand really is."

-- Written by Jason Notte in Boston.

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Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.

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