- The Washington Times - Friday, February 7, 2003

Carolyn Reynolds had never bought a Korean car before. In fact, the Jackson, Mich., teacher hadn’t owned a new car of any kind for 20 years.
But then she test drove a new Hyundai Elantra GT and found the five-door hatchback not only fit her budget, it had the features and flexibility she wanted, plus more.
“The perks that came with it the leather seats, sunroof, Michelin tires and my CD player were wonderful,” Ms. Reynolds said. “Of course, the price was very, very good, too. I guess what clinched it was the 100,000-mile warranty.”
Welcome to the Korean phenomenon.
Each year, increasing numbers of American consumers try out vehicles from two Korean automakers, Hyundai and Kia. And increasing numbers of consumers go the next step they buy.
According to George Peterson, president of automotive research firm AutoPacific Inc. in Tustin, Calif., the purchase reasons are clear.
“When you look at our data, the No. 1 purchase motivator for Kia and Hyundai is the warranty,” he said. “The warranty has really done a lot for them. And close behind is value.”
Both automakers provide a 10-year/100,000-mile limited powertrain warranty on every new vehicle. It’s transferable to new owners, provided they are part of the original owner’s immediate family.
There’s also a five-year/60,000-mile limited basic warranty on each vehicle and a five-year/100,000-mile anti-perforation warranty.
In addition, for the first five years, regardless of mileage, buyers receive 24-hour roadside assistance at no extra charge.
This compares, for example, with a three-year/36,000-mile limited car warranty on Hondas, which does not include free roadside assistance. Warranties on General Motors vehicles are typically for three years/36,000 miles, though Oldsmobiles have five-year/60,000-mile coverage.
Both Kia and Hyundai also seek to price vehicles so they’re seen as value leaders in their segments, especially by shoppers who take the time to compare prices and features.
For example, Kia’s seven-passenger Sedona minivan, with V-6, air conditioning, automatic transmission, floor mats, two sliding passenger doors, leather seat surfaces, sunroof, first aid kit, overhead console, fog lamps, faux woodgrain trim inside, two-tone body color, roof rack, keyless remote entry, cruise control and AM-FM stereo with cassette and CD player, is priced at about $23,000.
“This is for real,” Mr. Peterson responded when asked if the Koreans’ growth is just a short-lived development.
He acknowledged that Hyundai’s first 10 years were troubled because of quality woes.
But he credited the combination of the revaluation of the South Korean won (which allows Kia and Hyundai to price their vehicles extremely competitively), the automakers’ 10-year/100,000-mile warranty and their increased quality for bringing more consumers their way.
Hyundai had a record year in 2001, with 346,235 sales in the United States, said Bob Cosmai, vice president of national sales for Hyundai Motor America. And it led the entire auto industry with a 42 percent sales increase, he said.
In August, industry trade journal Automotive News said that if sales trends continue this year, Hyundai and Kia which are part of the same South Korean automotive group together could outsell the Nissan brand in the United States.
Hyundai, which began selling vehicles in the United States in 1986, sold more vehicles last year than well-known import brands Lexus, Mazda and Mitsubishi.
Kia, whose U.S. sales started in 1994, sold more vehicles in this country last year 223,721 than BMW.
Peter Butterfield, executive vice president and chief operating officer of Kia Motors America, compares Kia with Honda back in the 1970s.
Noting that it took Honda eight years to get to an annual sales level of 250,000 vehicles in the United States, Mr. Butterfield said Kia is on pace to sell at or above 250,000 vehicles this year. And he sees the potential to double that volume in the next five to seven years.
“We’re starting to establish real credibility in the industry,” he said.
Helping drive sales this autumn is Kia’s first-ever-in-the-U.S. midsize sport utility vehicle, the 2003 Sorento.
Offered in two- and four-wheel drive, the Sorento has interior passenger space that’s larger than a Jeep Grand Cherokee, according to Kia. The 192-horsepower, 3.5-liter V-6-powered Sorento can tow as much as a Toyota Highlander can, according to manufacturer specs.
Estimated starting price for the base Sorento LX will be under $20,000. Mr. Butterfield said Kia will be spending more money promoting the Sorento launch than on any other Kia.
It also will be the first time that Kia Sportage buyers will find another, larger SUV at Kia dealerships to move into.
“My anticipation is it will be sold out for the first six months,” Mr. Butterfield added.
Still, there’s concern in some consumers’ minds about quality. Mr. Butterfield said quality improvement has been a top issue for management for the past two years.
Kia and Hyundai posted the greatest single-year quality improvements in the 2002 J.D. Power and Associates Initial Quality Study. Kia improved by 21 percent in 2002 over 2001 levels and Hyundai was up by 19 percent, Power said.
Hyundai also posted the largest five-year initial quality improvement 42 percent in the industry. But no single Kia vehicle was among the top three category winners in 2002.
While not affecting Honda sales, Kia and Hyundai are getting close to 5 percent of the market, said Tom Elliott, executive vice president at American Honda Motor Co.
“We’d be kind of dumb to ignore that, because obviously, they’re starting with, I’ll say, low pricing, and they’ve got a very long warranty, so I think they have some marketing factors there in their favor,” he said.
Mr. Elliott added that Honda doesn’t see Kia and Hyundai as having leading-edge technology or novel packaging ideas.
“In many ways, they are like the Japanese were 30 years ago,” he said. “They’re good followers.”

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