- The Washington Times - Friday, March 6, 2009

The collapse of the U.S. financial sector is making for all manner of upheaval in the nation’s auto market, which is acutely tied to the nation’s economy.

The financial institutions effect has been disastrous on even the largest automakers: General Motors and Chrysler have been lent billions of dollars and have one foot in bankruptcy court. Mighty Toyota and acclaimed Honda are drastically cutting their vehicle production and hacking at every minor cost. And the European automakers continue to be battered by not only the U.S. economic crisis, but also serious downturns in their own backyard.

Like tossing a safe over a cliff, auto sales cratered in the second half of 2008 and are continuing the plunge to a current annual sales level of about 10.5 million units. Compare this figure to 2004, when new-car sales reached 16.6 million and to 2005, when new-car sales climbed to 16.9 million vehicles, according to numbers provided by the National Automobile Dealers Association.

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With U.S. annual auto sales projected to be millions less than we’d come to expect, experts are saying nobody can be a winner. Well, maybe not “nobody.”

Some industry analysts speculate the big-time shift in America’s automotive center of gravity could inject new energy to the South Korean brands Hyundai and Kia.

First, let’s be clear: “growth” for Kia and Hyundai could be relative. If U.S. vehicle sales continue at a pace of 10 million to 11 million annually, that won’t translate into much growth for any automaker.

For Kia and Hyundai, it won’t necessarily be about sheer numbers, but more about “market share,” which is the golden yardstick of the auto industry.

Last year, an awful one for the entire auto industry, the two South Korean automakers, both of whose brands have a strong message of value-for-money, were among a handful of automakers to post a market-share gain. And with consumers downsizing their automotive aspirations and other trends moving in their direction, Kia and Hyundai could be positioned to make the best of bad times.

Hyundai recently launched its all-new flagship, the 2009 Genesis, a formidably executed luxury sedan that costs tens of thousands less than comparable cars from premium automakers, such as Lexus and BMW, who could be considered uncomfortable with the notion of the Hyundai Genesis spoken of in the same breath. Equally important, the Genesis has earned widespread critical acclaim in the rarefied air of luxury cars - a serious dose of credibility for a brand with long roots in economy-car classes.

This could be the year of Kia’s big move, too. The company recorded its 14th consecutive year of market-share gain in the U.S. in 2008 and had its best-ever month for market share in January, when virtually every automaker was battered. This year, Kia has two new cars that will handily remind the industry of the brand’s value attributes while possibly winning it new credibility for daring design.

Kia’s unique and edgy 2010 Soul compact car - long a cult favorite in world markets - goes on sale soon and has the potential to be a big hit, even in our depressed market. The Soul’s shape is nothing short of provocative, while the price is nothing short of tempting, starting at less the $14,000.

In June, Kia replaces its best-selling model, the Spectra, with the Forte, an all-new car packed with sophisticated safety and electronic features and the most powerful engines in the class. Kia hasn’t priced the Forte yet, but it also is expected to be a screaming value.

“The market is moving to us and I think we’re moving to it as well,” Kia Motors America’s vice president of sales Tom Loveless told me at the recent Chicago auto show. “Value is the new cool,” he asserted.

Value - South Korean style - might prove to be an attribute that clicks with consumers in these troubled times. Industry observer Edmunds.com has data to indicate certain automakers that have been piling on incentives to lure customers could lose market share this year to Kia and Hyundai.

“We feel very good about our prospects this year, even in this challenging environment,” Mr. Loveless said.

Kia and Hyundai have reason to be optimistic. The auto-industry bromide that there are no problems that great products can’t solve will be tested this year when we see whether some of the promising new models from the two South Korean companies can succeed despite the fractured condition of the U.S. auto market.

Copyright, Motor Matters, 2009

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