Thursday, October 22, 2009

Hyundai: Growing through a recession

Some people are celebrating the fact that Hyundai is still growing through the recession.

"Hyundai Motors has done what no other global car company has–grown through the recession.

The Korean operation released financial results. It believes it will sell over three million cars this year compared to 2.8 million in 2008. Hyundai’s third quarter global market share rose to 5.5% compared to 5.2% in the second.

Hyundai’s third quarter profit tripled to $827 million from the same period in 2008. Chrysler and GM should be as lucky."

Over $800 million in profits is admittedly very impressive and if their products prove to be reliable, Hyundai will solidify it's position in the global market for decades. However, I'd argue that this is more a matter of people moving down market in this economy. People are shifting from Costco to Sam's, Target to Walmart, Walmart to Dollar General, Applebee's to McDonalds dollar menu, etc. This has led to a mini-boom at the low end of the economic food chain. I think this trend explains Hyundai's success. People that were marginal Toyota, Ford, Nissan, or Honda buyers in the past have moved down to the "dollar menu cars" --- Kia and Hyundai.

Admittedly, I'd rather the US government owned a bunch of Hyundai shares than a pile of GM and Chrysler at this point, but I think we need to be careful jumping to conclusions about what is behind this growth for Hyundai.

Cheers!

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