Korean Automakers Benefitting from Clunker Schemes
Cash For Clunkers a Trojan Horse for Lesser Known Brands
Korea’s Hyundai and its sibling Kia Motors recently reported strong results, driven in part by the US cash for clunkers and other car scrappage schemes. Hyundai reported record profits on Oct 22, while Kia said Friday it swung to a third-quarter profit from losses in the year-earlier period, earning rating upgrades from Credit Suisse to neutral from underperform, and from Macquarie Research to outperform from underperform.
While US total car sales were off 22.7% in September and down 27.4% year-to-date, Hyundai sales in September were up 27.2 percent from the year-ago month to 31,511; year to date, Hyundai’s U.S. sales were up 1.3 percent to 342,217. Kia sales gained 24.4 percent in September to 21,623; year-to-date sales were up 4.6 percent to 238,570, BNET reports.
As noted by Research Recap, makers of smaller, less expensive cars have benefited disproportionately from these schemes. It seems reasonable to assume that many of these purchases are simply bringing forward buying activity that would have occurred anyway in coming months and that this surge in sales will be offset by lower sales going forward. That said, it seems likely that there will be some long-term benefit to Kia, Hyundai and other “lower end” manufacturers such as Skoda.
The scrappage schemes have certainly encouraged many drivers to take a look at these makers for the first time, and finding that they get more for their dollar or deutschemark, and that these companies make some very decent and safe cars with long warranties.
This can only help build the brands of the Korean automakers and through world-of-mouth help them make further inroads into the US and European markets, much as Japanese brands did a few decades ago.
Also, following in the footsteps of Honda and Toyota, the 2011 Sorento will be built at Kia’s first factory in North America, in West Point, Ga, removing another barrier to purchase. For sure, Hyundai/Kia will be stiff competition for the reentry of the Fiat brand into the US following its tie-up with Chrsyler.
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