Tag Archives: Hyundai

Changing the way to buy a new car: it’s 1995 (and Daewoo) all over again

daewoo-mirrorsTwenty years ago today, a company called Daewoo Cars was launched in the UK. It’s since disappeared and yet it’s becoming more and more current.

Car companies are only now beginning to explore new ways of engaging customers, of unravelling themselves from the restrictive dealer model and exploiting the internet – virtual showrooms, pop-ups, and shops in malls; service like you get at an Apple store. Tesla’s first UK outlet opened 18 months ago in the upmarket Westfield shopping centre in London. And now Hyundai has launched a joint venture giving it an outlet at the Bluewater shopping centre in Kent, staffed by plain-speaking, plimsoll-wearing people who are not trained to sell and are not paid commission.

New Hyundai store in Bluewater Shopping CentreHyundai’s partner Rockar claims that the end-to-end web process you can access at the outlet is a world first. It’s not. Fiat abortively launched a near-identical initiative, Fiat Click, in 2011. And if you take the website out of the equation, the business model is Daewoo’s – launch date 1995.

I was part of the Daewoo launch team. We knew that the world didn’t need another cheap Asian car brand, another Proton. But we didn’t want to be a Proton. And we had a clean sheet of paper.

So we tore up the rule book. Then burned it and stamped on it. No dealers; no third-party sales. In an industry bound to the archaic, unfit-for-purpose dealer network distribution model, that made us pariahs. It made us notorious. Which was great for our awareness but it was also smart. The message was that when you dealt with Daewoo you weren’t sold to but advised, by Daewoo employees who were not on commission. We could become number one for customer service, which we did. Overnight.

The result was record share for a new market entrant in the UK – immediately ahead of not only Korean arch-rival Hyundai but also mature brands including Volvo and Mazda – with almost 95% awareness, and the ability to stand shoulder-to-shoulder with M&S as a customer-focused high-street brand.

The Hyundai Rockar model gives a great brand message: we’re modern, we do things the way you want them done, we come to you. That’s part of it of course, but there’s a far more pragmatic driver. Car companies want to go to where there’s high footfall, but city centre land is prohibitively expensive. So let’s adjust the thinking and go to where there’s both footfall and people in a buying frame of mind. And let’s have just one car on display so it feels more like a lifestyle retail outlet.

EE_Daewoo_1_webBut remove the web element – like sat nav, Sky+ and Simon Cowell, Sky+ it didn’t exist back then – and Daewoo was doing all that and more. Showrooms exclusively at retail parks, with interactive touch-screen info pods (yes, in 1995), free coffee and children’s play areas. Smaller outlets at Sainsbury’s superstores with test-drives from the car parks. And more customer touchpoints at the Halfords service centres.

We reassured customers about buying a car from a new name with messages about the then-mighty Daewoo Corporation. When I took journalists to Korea we would arrive in a 747, parts of which were made by the company. We transferred in Daewoo coaches to the Seoul Hilton, built and managed by Daewoo, where we went in Daewoo lifts to rooms with Daewoo TVs. We flew to factories in Daewoo-built helicopters, visited Daewoo shipyards with towering Daewoo cranes, and even watched demonstrations of Daewoo military tanks.

080129-sea-slugThe car operations became healthily Europe-centric. Headed by Ulrich Bez, previously at Porsche and BMW (and later Aston Martin), the company established R&D centres in the UK and Germany. The UK retail model was exported back to Korea and I was asked to advise the global Chairman Kim Woo-Choong’s office on communications strategy – I recall sharing a meal of sea slug with him and Bez in his Hilton penthouse, discussing a plan to establish a manufacturing base in the UK. Strange days but good days.

money-graphics-2005_954555aSo why did Daewoo disappear? Not because the UK model didn’t work but because the Korean economy and Daewoo Corp imploded. The Korean car industry had to be rationalised, so Kia was absorbed into Hyundai, and Daewoo sold off into the old-school homogeneity of General Motors. Oh, and Chairman Kim fled the country in 1999 to avoid charges for his part in the bankruptcy of a conglomerate ranked 18th in the Fortune 500 only two years earlier…

GM rebranded Daewoo as Chevrolet in 2005 before dropping the latter from Europe 15 months ago. And with that the last vestiges of the Daewoo we created appeared to be gone. Dead and buried.

Yet its influence and the trail we blazed in the UK are in the here and now, the new retail motor industry landscape – ironically being championed by Hyundai’s ‘innovative’ approach. So if you hear something strange beating at the heart of the new retail motor industry landscape, remember – that really will be the Daewoo.

Volkswagen group not profiting from its brands’ equity

_origin_Fakti-kas-tevi-parsteigs-9Martin Winterkorn, boss of Volkswagen Group, admitted this month that the business “urgently” needs better profits, and today’s half-year results announcement confirmed falls in both profits and sales. This is the company, remember, which has targeted global number one status by 2018, and since Winterkorn became CEO in 2007 CEO has increased production by 4m units and doubled its revenues.

One of the reasons for VW’s poor profitability is that it isn’t global in terms of geographical spread. It’s in the key growth market, China, but is actually over-dependent on it, whereas it has little traction in south and south-east Asia. And market share is relatively low in the USA, with the VW brand on the slide. Another factor is that VW is light on compact SUVs, the biggest growth segment globally. A further reason and perhaps the most significant is its sheer size – a company this big simply can’t avoid inefficiencies.

But here’s the elephant in the boardroom: VW’s problem is also down to brands. VW group isn’t merely huge; it has a huge brand portfolio, with 12 brands in total – stretching to trucks and motorbikes – and over 310 models. Paradoxically, rather than providing economies of scale, in the accumulation of brands the collective mass has outweighed the ability to exploit the efficiencies.

By 2007 it already had the considerable challenge of consolidating and managing a passenger car portfolio of SEAT, Skoda, VW, Audi, Lamborghini, Bentley and Bugatti. Each was struggling for both individual relevance and group synergy. Skoda had already begun to produce cars in the VW brand’s space. VW in turn was encroaching on Audi, which was moving onto mainstream segments previously the preserve of these brands while simultaneously launching de-facto Lamborghinis. Bentley was doing a fine job. Bugatti was, well, Bugatti, and SEAT was struggling not to be a Spain-only brand and was being jumped by Skoda. The group was competing with itself, and the mainstream brands were sharing the same market space but without sharing the economic benefits. And meanwhile the world was plunging into an economic downturn.

So what did VW do? Since Martin Winterkorn’s 2007 accession it’s added four more brands: Porsche, Ducati, MAN and Scania. It has also become the largest stakeholder in Suzuki and even consumed the design house Italdesign Giugiaro. And Skoda has stated that it wants to sell on quality and style, while Lamborghini and Bentley have announced SUVs.

VW’s strategy goes directly against the new automotive industry paradigm. Toyota has continued to excel in financial performance. It has not acquired other makes but concentrated on its core brand, which has maintains clear values, and its own premium-luxury brand, Lexus. Hyundai, which led even Toyota on profitability in 2013, was forced into a merger of unequals with Kia when the South Korean business bubble burst in the late 1990s. They produce cars for the same market segments, yet with only two brands they’ve not only managed the situation by differentiating the brands but have grown stratospherically since 2007. Meanwhile Ford has divested itself of Aston Martin, Volvo, Jaguar and Land Rover, and is emerging strongly under the ‘One Ford’ mantra. GM is now doing the same in Europe, discarding Chevrolet to concentrate on Opel/Vauxhall. And VW’s German rival BMW has limited its acquisition trail to the very distinct Rolls-Royce and Mini brands and retained the BMW group values across its portfolio.

They’ve all benefitted from a focus on a single brand or a primary and secondary brands. It’s very hard for Volkswagen group to do the same. The VW range’s own brand is still strong in spite of becoming part of the uncomfortable brand portfolio dynamic. But the group’s brand is infinitely less than the sum of its parts. It’s impossible to say what it stands for in the way that you can about its volume peers Toyota and Ford.

That VW’s profits are suffering is not surprising. That’s what happens when a goal defined by volumes is set. If the goal were instead to define and differentiate the brands more clearly, with each given the objective of becoming the most desired among consumers, then the volumes would follow. They would do so more slowly but they would do it sustainably.

Vauxhall – the redefining moment

01VauxhallNewBadgeNew Vauxhall boss Tim Tozer says that redefining the brand is his number one task. Not volumes. Not chasing Ford. Not trying to become more upmarket. That’s refreshing from a car company boss.

With disarming pragmatism he says the brand is neither cheap nor premium but needs to fight for the middle ground, and that it stands for “good value, good cars, Britishness”. It’s prosaic but it’s astute. Brands are stronger when they’re built on realities and genuine attributes.

That Britishness is key. Vauxhall is unique to Britain: everywhere else a Vauxhall is an Opel. Yes, it’s the same car, rebadged, but it doesn’t have to fit absolutely with Opel positioning and values. So Vauxhall presents an unusual opportunity to depart from Opel’s pan-European branding and positioning.

Vauxhall needs this latitude: before it entered into full product-sharing with its sister brand, Opel had the sexy GT sports coupe at the same time as Vauxhall had the Victor, a car your uncle Ken would have driven to the bowling club. Opel’s logo is a lightning bolt referencing the German military; Vauxhall’s is a heraldic emblem referencing its Luton home. The products may now be the same but the brands are different.

In recent years mid-market car companies like Vauxhall have been squeezed to within a millimetre of their lives, partly by the encroachment of the value brands but mostly by the relentless expansion of the premium brands into mainstream product segments. The way out of this is not to take them on directly. Vauxhall’s Opel sister brand has already acknowledged that, talking now about premium styling, materials and technology, not becoming a more premium brand. There’s a big difference. Tozer understands this.

Yes, other mainstream makes are trying to go premium, and some may make it work. Hyundai for example. It’s just announced the Genesis model for Europe which will have a list price of almost £50,000. Few will be shifted but Hyundai is in a different place from Vauxhall. It’s still emerging. The Genesis is a way of telling European consumers about the quality it puts into its everyday cars. It endorses the Hyundai brand.

Vauxhall and Opel are due 27 new products by 2018, and it starts later this year with a new Corsa supermini. That’s a good thing. Superminis sell. They’re mainstream and so is Vauxhall. The Corsa – not cheap, not premium, but attractively styled, with a high quality interior, efficient engines and the latest technologies – is the car which will endorse the redefined Vauxhall brand.

Hyundai needs to avoid joining the mainstream

2015-hyundai-genesis-rendering-1-1While the rise of the premium brands seems to have defined the changing dynamics of the car industry in the last decade, the growth in stature of the value brands is a more remarkable story. Hyundai and Kia in particular.

It’s much harder to grow a brand upwards from a budget baseline than it is for a brand to apply premium qualities to more functional vehicles as BMW, Mercedes and Audi have done. And Hyundai and Kia have done it without the resources of an existing group.

The Korean group has experienced phenomenal growth, with a doubling of European sales since 2008. Both brands have reeled customers in with competitive pricing and long warranties, and it’s easy to understand why the value brands have prospered in the years since economic meltdown.

But it’s not all about value. In a visionary move, in 2006 Kia recruited the European designer of the iconic Audi TT to head its styling. He’s since become the boss of all Hyundai-Kia design and the most senior non-Korean in its business globally. In so doing the management has elevated the brands and created a compelling combination of the rational and emotional. They now effectively offer what Toyota did a decade ago – reliable, hassle-free motoring for ordinary consumers – but with added style. And remarkably they’ve now comfortably overtaken the Japanese giant in Europe: Hyundai’s market share this year is 3.5% and steady, Toyota’s 4.0% and falling. Kia’s is 2.8% and climbing, giving the pair a combined 6.3% of the market, 50% more than Toyota.

And now Hyundai has become one of the world’s 50 most valuable brands according to the Interbrand Best 100 Global Brands index. To put that in perspective, we’re talking companies in all sectors. Companies like Coca-Cola, Google and Apple. Hyundai’s rank is 43, putting it ahead of Sony, Facebook and Heinz.

In automotive terms it’s just one place behind Ford at 42. It’s seventh out of all automotive manufacturers, with Toyota, Mercedes, BMW, Honda and VW the only other brands to beat it. Over the last five years Hyundai’s brand value has grown 96%, mirroring sales.

Like sister brand Kia and Skoda, Hyundai now wants to sell its cars more on quality and less on value. It wants to raise perception and prices, to create more profit. But like the premium brands moving into mainstream territory it faces the possibility of losing some its brand relevance. Unlike the premium brands however, when the value brands move towards the mainstream they risk becoming merely part of the squeezed middle to which they currently offer such an appealing alternative.

Hyundai’s challenge now is to grow sustainably: to retain brand differentiation and to nurture a strong enough brand personality to avoid joining the mainstream.

Top Kia

KED 10 Teaser 1 - IAA Frankfurt 2013So the Kia Cee’d, Top Gear’s Reasonably Priced Car, has gone, replaced by a Vauxhall Astra. Top Gear says it was the programme’s decision. Kia says the company decided.

Whichever, Kia had outgrown the programme, no matter how big a brand Top Gear’s become. The fact that there’s a new-generation Cee’d isn’t important. Kia had already moved on. Moved up in fact. Kia and sister brand Hyundai have grown massively in Europe over the past five years or so. In 2012 they sold about 250,000 more cars in Europe than Toyota and were not far short of Renault, Peugeot and Opel/Vauxhall.

Hyundais and Kias are good value and come with long warranties, which has helped them in the downturn. But more significantly that they’ve become desirable, especially Kia, by instilling great styling across the range. In 2006 Kia brought in Peter Schreyer, designer of the Audi TT, and has since elevated him to president of the company, the first non-Korean to hold the title. He now heads global design for Hyundai too.

The Korean company has recognised the importance of design in generating appeal and desirability. It was canny in leading with Kia, the junior partner and a brand with less baggage, and following with Hyundai, with a well established and conservative customer base. But people still buy cars on the basis of how they look. If they come with great customer care then what’s not to like? Now there’s a plan to re-launch the Lada brand on the basis of a style revolution under a British designer, Steve Mattin, who was previously design boss of Volvo.

Even Top Gear’s new incumbent is at it. The Astra is a decent-looking car, and Vauxhall/Opel parent GM Europe has introduced a rash of very well styled new models like the Astra GTC coupe, Cascade convertible, Mokka mini-SUV and the Adam, a Mini/Fiat 500 rival.

The carmakers are waking up to design. And the Reasonably Priced Car has become better looking than some of the stars who drive it.