REFILE-New curves, good value drive Hyundai's China sales

Fri Nov 13, 2009 9:11am EST

(Adds Jacqueline Wong to byline)

By Fang Yan and Jacqueline Wong

SHANGHAI Nov 13 (Reuters) - China is falling in love with Hyundai Motor (005380.KS).

The South Korean company has accelerated to become the maker of the top selling foreign car brand in the world's largest auto market today from virtually nothing just seven years ago.

Its rapid rise in China, one of the few bright spots in a global auto market mired in red ink, parallels its broader move into the fast lane on its growing reputation as a solid value proposition in troubled economic times.

Clever marketing, including a new model whose name sounds like "falling in love with you" in Chinese, plus cash incentives under Beijing's massive economic stimulus plan haven't hurt, either.

China passed the United States in January to become the world's largest auto market, on track to sell a record 13 million vehicles this year, even as sales in other markets around the globe tumble.

Hyundai has found a comfortable niche for itself in the market between domestic brands known for their cheap prices and foreign brands such as Volkswagen (VOWG.DE) and Toyota (7203.T), known for their quality but also higher prices.

"Hyundai is somewhere in between. It's more expensive than Chinese brands and cheaper than other global brands, but still delivers a relatively high level of quality," said Klaus Paur, director for global industry consultancy TNS's North Asia automotive division.

"That's what makes Korean cars so successful especially in the segment where consumers get government incentives."

Ironically, the image that has served it well had some analysts predicting only a few years ago that Hyundai would be the first to be squeezed out as Chinese start-ups raise their quality and offer lower prices.

Lin Jian, a 32-year-old Chinese engineer, and his wife were just two of the thousands of Chinese who have propelled Hyundai's new Elantra to China's best selling foreign car brand this year.

"The new Elantra has a sleek exterior but not over the top. And it feels good on the road," said Lin, pulling over after test driving a silver Elantra near a dealership in suburban Shanghai on a recent fall day. "Most of all, it's value for money."

For a story on Hyundai putting the heat on Japanese rivals, click [ID:nT281978]

CUTE MARKETING, ECONOMIC INCENTIVES

Since its 1975 launch of the Pony, South Korea's first home grown car, Hyundai has made big strides overseas as well as dominating its local market.

It is now the fourth best-selling foreign brand in China, ahead of much longer-time players like Honda Motor (7267.T) and Nissan Motor (7201.T), according to J.D. Power and Associates.

Its rapid rise has been fuelled in part by Beijing's raft of economic stimulus measures rolled out earlier this year during the global crisis, including incentives to buy more fuel efficient cars similar to the U.S. "cash for clunkers" programme.

Hyundai's third and fourth generation Elantra models are both available in China both with smaller 1.6 litre engines, which enjoy low sales tax under the stimulus plan.

Hyundai sold 197,500 new Elantras between January and October, leading Toyota's Camry by 70,600 units and Honda's Accord by 56,500 units, official data showed. Older Elantra sales also did well, up 45 percent to 142,767 units.

"Hyundai targets its new Elantra at the affluent bigger cities and the cheaper older models at smaller cities. That strategy has worked out very well," said John Zeng, an analyst with industry consultancy IHT Global Insight.

Meantime, the company has sought to boost its position through diversification, rolling out its i30 in September.

In addition to appealing to a higher-end buyer, Hyundai is also using cute marketing to sell the model, whose Chinese name sounds like the phrase "falling in love with you."

"We hope people will love i30 as much as they do with Elantra," Fan Yufei, general manager of a Hyundai dealership in Shanghai, told Reuters. Chinese buyers have taken home more than 6,000 i30 cars in the past two months. (Reporting by Fang Yan and Jacqueline Wong; Additional reporting by Chang-Ran Kim in TOKYO; Editing by Lincoln Feast and Erica Billingham)

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