Why Hyundai Failed to Conquer Japan

    November 27, 2006 09:22

    Hyundai Motor’s exports to the U.S. and Europe surged. Not so to Japan: instead, Japanese cars are making a dent in the sales of domestic carmakers here. Why is that Hyundai can’t get a foothold in the island country seven years after setting up shop there? Pundits say the Korean giant’s unsophisticated brand image is partly to blame, as is its marketing strategy.

    ◆ Sluggish sales despite Bae Yong-joon

    Hyundai Motor Japan started selling the 2.4 liter Sonata in September 2005. Car Graphic and other specialist magazines gave the model the thumbs up, and Hyundai’s big advertising campaigns in newspapers and on TV until last summer featured Bae Yong-joon, Japan’s favorite Korean actor thanks to his part in the fortuitously named soap “Winter Sonata.” Hyundai Japan’s then-president Toshiro Sugawara had no doubt: "The Sonata is our hidden chip in conquering the Japanese market,” he said. But the model is selling a disastrous 20 cars a month there, compared to 10,000 a month here.

    The consensus is that it was a mistake to hire Bae, whose appeal is mainly among mature housewives. "Japanese housewives don’t favor large sedans like the Sonata. They primarily use small and convenient multi-purpose compact cars when they buy their groceries,” says Hong Hyun-soo (37), a Korean Japanese doctor from Osaka. "It’s men in their 40s and 50s who drive large sedans, and they make up only a small share of the total car market here, unlike the Korean car market", he said. He added if Hyundai featured Bae in its commercials for the TB, a hatch-back model also known as the Click, it might have appealed more effectively.

    A Japanese commercial for he Hyundai Sonata featuring Korean Wave star Bae Yong-joon.

    ◆ Too big

    Another problem Hyundai failed to notice is that parking lots are smaller in Japan than in the U.S. and Korea. From the perspective of the Japanese, the Sonanta is big, with its 183 cm in width. Except for new buildings, it is not easy to park a car in Japan if it is wider than 180 cm, especially the mechanic lift variety. What's more, the market segment for large sedans has long been on the decline there. The Toyota Camry and Honda Accord are selling 300,000-400,000 a year in the U.S., but no more than 12,000 in the Japanese market. It is too much to expect the Sonata to do well in Japan, experts say.

    ◆ Long-term strategy

    The 2.4 liter Sonata is priced between 2.09 and 2.68 million yen (W16.7 -21.4 million) tax included, cheaper than in Korea, where it costs W24.7-27.1 million. The price is similar to the Honda Accord and Mazda Atenza in the same class and only 15 percent cheaper than the Camry. That is not nearly attractive enough to Japanese customers, who would already have to discard Hyundai's poor brand image and after-sales service. Japanese customers of imported cars want either a brand image that is better than that of indigenous cars, or a car that is in other ways unique. While Hyundai could have an edge in the second category, the number of Hyundai cars sold in Japan is expected to stand at less than 2,000 this year, when the number of Japanese cars sold in Korea is expected to exceed 10,000.

    Pundits say Hyundai needs to become more aggressive in Japan, one of the world's three largest car markets with 5.85 million units sold last year. "Hyundai needs to introduce models that differentiate themselves from Japanese cars in terms of type and build its brand image in the longer term,” says Shotaro Suzuki, the Seoul correspondent for the Nihon Keizai Shimbun.

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