Hyundai Sonata 2006-2007

smith20

I agree if the Sonata lives up to the positive expectations then it will lead in the direction of pricing parity (unfortunately, for us consumers!). I am viewing it like a rung on a ladder or a single step on a staircase, kind of like Backy's long term view. The pricing history just holds so much weight.

It's kind of like college football rankings (really, any ranking). If a #19 team beats a #5 team, then in the next poll, the #19 goes to maybe #12 (not #5) and the #5 might drop to #13. Or, if an unranked team scores a big upset over say the #3 team, the unranked team might merely debut in the next ranking at #22. I think each "winning" model will close the gap a little bit for Hyundai.

But, then there's another factor. The Koreans have an inherent domestic labor cost advantage. The per capita income in Korea is around 10,000 USD whereas the US and Japan are both around 35,000 USD. That positively affects their labor cost per car and to a lesser extent their domestic component costs. So it'll also be interesting to see down the road what Hyundai decides to do with that margin. The greatest profit to them might be to try and keep that margin, or it might be to offer the margin to consumers and instead generate higher unit sales and higher total profit.

So, even with a series of great models like the Sonata hopefully turns out to be, I think Hyundai may still sell at a discount to other manufacturers.

backy

And wither that labor advantage with the new Hyundai plant in the U.S.?

smith20

Absolutely none of course as far as assembly labor costs are concerned . . . and I guess since the Sonata will be produced there, there is no assembly labor cost advantage for the that model. I think I read somewhere that Hyundai is planning to import their sheet metal from Korea to Alabama instead of using a domestic US supplier, which is unusual. Many of the components will probably still arrive from Korea as well.

However, I suspect the Alabama plant is more for political gain than economic gain, but I'm no expert of course. I do know that the foreign car companies like to point out "built in America" when they can. Economically it can make sense for a Japanese company to do it since Japanese and US workers are similarly paid. But as for Korean . . . I personally believe the Alabama plant is more for building marketing inroads into this rich nation's economy.

If they go on to build more plants in the US and produce most cars locally, then I guess there isn't much of an assembly advantage as I assume. I guess we'll see in the coming years . . .

delta4

"However, I suspect the Alabama plant is more for political gain than economic gain, but I'm no expert of course." - smith20

Smith your thoughts and speculation as to the rationale behind the construction of the Alabama plant is speculative edging toward geo-political para-dramatic. Firstly, Hyundai's strategy of "built in America" is very sound when you look at the logistical challenges and the overall goals set by their management.

Hyundai is not interested anymore in merely holding their own. They are dedicating every resource to doubling their output in the next 5 years. By establishing a beach head in the U.S. they are assured of becoming a mainstay here. They have positioned themselves to up market their product line. They are taking the steps to improve and exceed quality on many levels of production.

Based on their stated objectives, they should be on an equal competitive footing within the next two or three years and able to challenge the leading rivals, Honda and Toyota. They have said as much in the press.

smith20

I know it's purely speculative. Which is why I said it'll be completely wrong if they establish numerous other manufacturing sites in the coming years. I think Toyota has about 14 different component manufacturing and assembly plants in the US. I was just offering an alternate spin on the topic that came to mind when as I read some of the posts.

I do know that Hyundai has recorded some increasingly fat profits in recent years compared to losses just five and six years ago. All while offering consumers 1k, 2k, and even 3k dollar rebates on cars that aren't all that expensive in the first place. That leads me to believe they have a huge production cost advantage compared to the Japanese, European, and US manufacturers and I think they might still employ a discount strategy, albeit smaller, as their reputation improves by delivering high quality models like we're hoping and expecting the Sonata turns out to be.

Maybe it's just wishful/self-interested thinking on my part . . . but I love purchasing a car that is similar in quality to other options, but for thousands less! Anyway, I am kind of departing from the Sonata topic, which I seem to do quite frequently, so I'll leave it at that . . .

danf1

It is not uncommon among car manufacturers to increase pricing a few hundred dollars on a yearly basis with virtually no changes in the cars at all. If the new Sonata is larger, more powerful, more refined etc... will a 1500-2000 dollar price increase be viewed as unreasonable? Even with such an increase, the price will still undercut Japanese competition substantially in similarly equipped models.

rdsc

I think the new plant is entirely practical not political. Hyundai's main plant in Ulsan is already the largest single automotive manufacturing facility in the world (4.8 million sq.m !)How much bigger can it get? They also have 2 other plants in Korea, one for busses and trucks and one for sedans (Sonatas and XGs). Their only other plants I believe are in India and Turkey. If Hyundai is to reach its stated goal of becoming the 5th largest car company in the world, it is going to need more production facilities. Alabama may be just the begining. BTW the labor advantage is still in tact if they can produce the same number of cars as Honda does in Alabama (300,000) with half the staff, which is their plan.

backy

That is a good point. The '04 Sonata GLS is $19,889 w/ABS, and the '04 Camry LE V6 is $22,775. So even if Hyundai raises the price of the new Sonata by $1500 they would undercut the Camry by almost $1400, assuming no price changes on either car for '05. Whether that will be enough of a price difference to allow Hyundai to drop its incentives. (However, Toyota has had incentives on the Camry of late also.)

danf1

Even well through the 2003 model year, the Sonata was being sold without any cash incentives. Sales were typically double the previous designs sales with heavy incentives. I believe that if this car is as good as it seems to be on paper, incentive spending will be low.

iluvmysephia1

with less staff. They're testing it's practicality out now and production is probably about to begin on the real thing if not already in the works as I type this message. HyunKia are well on their way to being a Top 5 worldwide automaker my 2010. With the Long Haul assured until 2008 they should reach their goal.

Hyundai is not an automaker afraid to use robots. I don't have stats to back this up(I would be very interested to know, though)but I would venture a guess that Hyundai uses more robots than any other automaker. Somebody find that out for sure for us in their spare time, OK? Point being is that robots actually save an employer big-time cash. Healthcare costs are dicing into GM, Ford and DMX profits in a large manner, huh?

backy

Q: Why would Hyundai tend to use more robots than other automakers?
A: Because Hyundai makes their own robots! :-)

norne

Q. Why is Hyundai bringing in steel from Korea?
A. Because Hyundai has a division that produces steel thus making the cost cheaper.

backy

And don't they make their own ships, to carry the steel?

smith20

I don't think political and practical are mutually exclusive. I think the Alabama plant is more for improving Hyundai image and acceptance in the US in the eyes of US consumers. In fact, I actually just saw a Toyota commercial on TV about an hour ago wherein Toyota boasts that they have more than 10 manufacturing and assembly sites in the US and produce 1.2 million cars domestically in the US. The difference for Toyota, I think, is that for popular high volume models, it is BOTH politically and economically wise to produce the car and trucks locally in the US.

You said Turkey and India are their only other manufacturing sites outside of Korea. I think those sites were picked with more purely economic reasons in mind in light of the fact that per capita income in Turkey is about 2500 USD and in India it's about 500 USD. Even in the more affluent industrialized areas of those countries the labor will be relatively inexpensive.

I agree with what delta4 said; that the Alabama plant is to establish a "beachhead". I think that beachhead focuses on image. It makes a lot of sense to me that they will assemble the Sonata here in the US because it will likely appeal to more US consumers and lead to higher unit sales. (will win over many people who are offshore-aphobic). The trade-off, I think, is that they will not generate as big of a profit per vehicle as ones say built in Korea, Turkey, or India that could be sold in the US.

Thus, I think producing the Sonata or any other model in Alabama yields more of a political (image/reputation) gain over a purely short term economic gain (profit per vehicle). It'll help them further grow unit sales in the US.

smith20

The Hyundai Chaebol listed these as its "core" businesses in 1998: automotive, construction, shipbuilding and heavy-chemical, electronics, banking and service businesses.

So they probably build their own manufacturing and assembling campuses as well.

It's all about vertical monopoly.

smith20

I bet you're right about the cost increase. For fun, I'm going to predict right now that a fully loaded 2006 Sonata MSRP is around $23,500 +/-$500. That'll still be a few thousand less than the Accord and Camry. It'll be funny to look back in 8 months to see how close/off any guesses are.

alpha01

$23,500 for a 230 hp V6 4 door sedan with 17 inch alloys, leather, moonroof, stability control, park distance control, auto climate control, and Hyundai's warranty?

I dont know... That sounds low. Perhaps $24,500?

~alpha

norne

I think they do. I believe Hyundai is to korea what GE is to US. Hyundai has their hands in just about every part of the korean economy.

I read somewhere how Hyundai is suppose to be using some different unusual method for body stamping. would you happen to have any info on that backy?

backy

MSRP on a loaded '04 Sonata is $22k--and that's w/o stability, park distance control, 17" wheels, and other stuff the '06 would have. There could be a price increase for '05 also (my bet it would be small since the current Sonata is getting long in tooth and still needs to compete with Malibu, Optima, Sebring etc.). So $23,500 for a loaded '06 would be a really good deal, just a bit over a base model Accord or Camry V6. IMO Hyundai would be wise to keep the price down initially, bump it up a little over the '05, get lots of them on the road and build acceptance and marketshare, prevent the need for rebates, and then ratchet the price up.

backy

I'll see what I can find out when I am in Seoul next week. I bet I'll see lots of brothers and sisters to my two Elantras there. :-)

norne

that would be nice. :-)

When you have some freetime while you are in Seoul, see if you can check out the new sonata in person and give us a feedback.

I was in Korea several years ago and I think the elantras are known as avanti in korea.

smith20

Oops, I messed up my '04 to base off of . . . I figured 21k tops for '04 not 22k . . . so I guess I might have guessed the same number as you alpha . . . I guess to be different I'll revise to 24,000 even. haha

iluvmysephia1

also look for the new 2005 Kia Sportage's on the street and tell us what you think. Compare them to the 2005 Hyundai Tucson, for example. Early word is the new Sportsman is a HUGE hit in South Korea already.

Find out what you can about the Sonata, too. Anything extra would be cool to add to what we're already discussing in this thread. Cool opportunity for you to go to the land of automobile production supremacy. =;)

danf1

I'll go with $24,250 just for fun.

rdsc

On further reflection, the politics/beachhead idea makes a lot of sense. Hyundai/Kia is now doing design work in California (not cheap) and are working on a research facility in Frankfurt Germany (also not cheap). These must have a lot to do with "being seen" both in America and Europe . On the robot thing Hyundai not only makes there own, they make them for other car companies as well. It comes as big surprise to BMW owners to learn that their car was made by Hyundai robots!

backy

Mercedes-Benz owners too.

iluvmysephia1

South Korea's schoolchildren score better than kids from any other country on the face of the planet. It's true. Lots of bright prospective engineering students being produced and molded over there. No, I can't remember my source for that stat, but I can tell you that it was on another website that was recently shut down in which Hyundai automobiles werre the prime topic. Anyone think of which one I'm talking about? All of a sudden one day I go there and it's been shut down. Anyhoo, their schoolchildren are bright. At least some of them are and, yes, they go to work for Kia, Hyundai and the former Daewoo, which is now called GM Daewoo Auto & Technology Company. A smart move on GM's part, incidentally. Nothing really negative has been publicized about that move of theirs. They spent $318 million to get inroads into Asia for their(basically Daewoo's!!)product!

smith20

Part of it is that they just plain work harder and longer than students in the USA for example so their top students have had more classroom time to acquire knowledge and sharpen their mental skills. I think many, if not all, students in Korea go to school for a least a half day on Saturday for a total of six days of schooling per week.

I've been very bullish on Hyundai chances for rising among the ranks car manufacturers ever since I joined the Edmunds forums because the Koreans have already penetrated and grown in other competitive industries. 20 years ago the Japanese controlled over 75% of the DRAM (computer memory) market. South Korean company Samsung alone now controls 33% of the world DRAM market. The Japanese combined are less than 15%. What they simply did was make DRAM products of similar quality and performance and did it cheaper.

I personally think Hyundai is on track to do something similar in the car world. (and I know from reading posts that many of you agree) I can't wait to see the US market reaction to the 2006 Sonata to see if they're still on the growth curve or not. The more I post and think about it, the more impatient I get and it's still months and months away!

backy

The Asian Wall Street Journal for Oct. 4 had a big story on Hyundai's plans to raise its profile with a "Made-in-America" push, focued on the new Sonata. The article mentioned that the new NF will sell for "about $2000 more" than the EF and has a roomier interior and a more fuel-efficient engine. The article also said the NF would start coming off the line in Alabama in March.

Some analysts were quoted, with mixed reviews. Some were bullish on the NF and how it would raise Hyundai's fortunes. Others are less optimistic and are taking a wait-and-see attitude. One analyst who drove the NF had concerns over the NF's durability and transmission--it didn't say why he had those concerns.

The article said the EF now has 5% of the midsized car market in the U.S., and Hyundai hopes to increase its share to 8%. The Sonata accounts for 12% of Hyundai's sales and 20% of its operating profit. Hyundai's export sales jumped 20% in September from 2003, but domestic sales fell.

smith20

Very interesting. I guess it's going to come down to if it's "close enough" to the Accord and the Camry. I imagine a well-funded advertising campaign will get people to check it out and if the test drive experience is substantially similar to Accord and Camry, then they've got the 8% in the bag.

I bet the advertising will focus mainly on "Made-in-America" and Sonata feature content not available on Camry and/or Accord and then they'll casually mention the better price (or maybe not at all). That way they'll pique viewer interest and create an image of an equal peer contender to Accord and Camry and not come off looking as "cheap" alternative . . .

delta4

Smith - We can rest assured that the marketing will contain enough teasers-on-features and the "Made-in-America" moniker will be pushed ever so subtly. I think it is interesting that the issue of Hyundai's tranny for the new NF Sonata should come into question given the fact that this is a brand new model from the ground up with no carry over from the previous model.

Make no mistake this is definitely the opportunity that Hyundai will have to shine and gain consumer confidence to be on a par with the preceived and hard earned reputation for quality that both Honda and Toyota have proven.

norne

I think thats just typical analysts reaction to anything new on the market. Some will be more bold and go out on the limb while others will take more cautious approach.

backy

We can rest assured that the marketing will contain enough teasers-on-features and the "Made-in-America" moniker will be pushed ever so subtly.

Actually the AWSL article said the "made-in-America" angle would be a focus for the Sonata marketing campaign in the U.S.

smith20

Okay, well we'll see what happens on our TVs in a few months . . . I just saw a Hyundai Tuscon commercial last night and they didn't mention anything about price or value. It seemed to focus totally on its style and storage capability.

I think this is "an" opportunity to shine and gain consumer confidence and relate the company to Honda and Toyota type cars and not "the" opportunity to gain consumer confidence to gain that reputation.

I don't know if you meant it that way or not, but I just read it that way with the "the" before opportunity. I personally don't think this is make-or-break for the company. If this product turns out to be a miss, they'll just launch another salvo in the future and they'll be relentless until they achieve their ultimate goal of being one of the top and well respected brands in the US.

delta4

Smith - My take on Hyundai is that they have an opportunity to gain much more consumer confidence = market share with the launch of the NF Sonata. I believe both our posts are in actual sync.

The latest news on pricing comes from an article in today's C&D http://www.caranddriver.com/article.asp?section_id=30&article_id=8725. Pricing to be from 16k to 23k (this maybe base price) ---Also in other related Hyundai news another new survey this time from Strategic Vision has rated Hyundai just behind luxury brand leading Lexus as among the best value among car owners.

The most impressive thing about this article is that not only did they beat out Honda and Toyota but none of the domestic brands even makes a blip on the radar. http://www.azcentral.com/business/articles/1004Car-Value-ON.html

smith20

Yes, I think we both see a lot of potential upside for Hyundai. I was just hedging my optimism a bit.

alpha01

The C&D Daily auto insider did not say the new car would be from 16 to 23K, what it said was "The current model sells in the U.S. in a range between $16,000 and $23,000. The new one is expected to sell for about $2,000 more." So, 18-25K, right?

~alpha

smith20

I saw that too, but I didn't understand how they came up with $23,000 for 2004 . . . Hyundai's website has $22,034 for LX package 7. What am I missing?

iluvmysephia1

named Tucson, along with the fine report just out from Strategic Vision will all help Hyundai out immensely as they surge upward in popularity and sales. Pop over to the Tucson site here on Edmunds for a taste of the new-found enthusiasm for this new small SUV. People are basically drooling over it. We could use more pricing information on both rigs. Maybe it's on their respective manufacturer microsites, eh?

backy

Well, $22,034 rounded up to the next highest thousand is $23,000. ;-)

I finally saw a NF Sonata in Seoul, but it was on a pedestal at Inchon Airport. The good news is it's a clean, modern design. The bad news it no longer stands out, and could be a Toyota, Accord, Nissan (or even an Impala, which IMO it resembles in the front). Maybe that's what Hyundai intended--if you are going to pay a price of a Japanese car, by golly it's going to look like a Japanese car.

If you like the styling of the Camry, you'll like the new Sonata. That's the car it most resembles IMO (except for the Impala-like front). BTW, I don't think the rear looks anything like the Accord. The tail lamps have a much different shape (although they are horizontal like the Accord, but more like the last-gen Camry than the current Accord).

They also had a Tuscon on a pedestal, in blue, and I thought it looked sharp. The Sonata was beige, which may have lent to its ho-hum appearance. But keep in mind Honda and Toyota have sold tons of cars with boring styling, so the Sonata's more mundane styling could be good news for sales.

delta4

"The C&D Daily auto insider did not say the new car would be from 16 to 23K, what it said was "The current model sells in the U.S. in a range between $16,000 and $23,000. The new one is expected to sell for about $2,000 more." So, 18-25K, right?" - alpha01

alpha, actually Hyundai tested their pricing here in the U.S. I agree that the low of 16k may be reference to the current '04 Sonata. However from what I've seen on another forum similar to Edmunds, Hyundai may set the price on the low of approximately $18-19k. With the high around $23k. By the way, Hyundai is reported to have tested this price already here in the U.S. (based on the NF design). I'm sure this doesn't mean that all options are included.

Of course there is a tremendous amount of anticipation and excitement building around the launch of the NF. As a curiosity I saw a comment on another auto site http://www.autoblog.com/category/hyundai/ which expressed "surprise" that in the recent survey conducted by Strategic Vision, Hyundai was found to be the Best Value, based on price, affordability and expected reilability second only to luxury brand Lexus. Apparently, like so many others asleep at the wheel, Hyundai has caught them napping while it has been busy shifting into high gear.

I believe we can all agree that there is no doubt Hyundai is moving ever so swiftly from challenger to heavyweight contender.

danf1

The dealer meeting just concluded. The new Sonata and XG were there. The XG is incredible, but thats another forum. Hyundai claims there will not be a price increase on the new Sonata. Time will tell if they can deliver on this promise, but they seemed adamant about it. Also, the Alabama plant is going to be managed by Koreans. A little Gung Ho remake maybe, but reassuring when it comes to quality standards and expectations.

iluvmysephia1

raising '06 Sonata prices. As to the Montgomery plant's management, it only makes sense that Hyundai will manage it with South Korean Hyundai top-level workers from the home country. Their processes are working well and their robots are reacting on command. The American workers that have landed those jobs at Montgomery are fortunate to have gotten them, yet they are going to have to work their butts off for Hyundai. Congratulations to those Alabamans who've landed jobs at Hyundai! Ya did done well! Enjoy those Drive-By Truckers and their new CD 'The Dirty South' as well. That's some down-home southern rock cookin' at it's best, y'all!

ray h

Yeah, all that and the factor that the "Southern Work Ethic" doesn't include a standing invitation to union organizers...

smith20

Interesting. Maybe they will in fact realize a $2,000 "price increase" by not yielding a rebate of any kind to the consumer . . . it does seem like a smart move.

pzev

That's the way it should be done. Keep the price in check and the rebates in check. That means everyone gets in on a good price and resale value would be kept in check. Getting a good price up front, long warranty, solid car, and on top of that a reasonable trade-in value is a recipe for success.

The new Kia Spectra is an example of potentially getting screwed over big time. Not with the car itself or the warranty or reliability, but the rebates are going to be insane on this car. You have conquest rebates, loyalty rebates, changing normal rebates, $1,500 rebates for only Florida residents during the hurricanes. Check it out. Non-California residents lose $1,000 in rebates. California residents get $2,500 off while non-California residents get only $1,500 off. This is simply ridiculous and people are going to get taken to the cleaners during resale time. Hyundai/Kia needs to stay away from the GM method of pricing. I have a GM so I know all about pathetic resale value. And this is coming from someone who places resale value low on the priority list.

iluvmysephia1

the consumer does get a decent car out of the mix, though. The new Spectra/Spectra5 are very nice cars. They need to know up front that they'll have a hard time getting value at trade-in time, though, if buying with large rebates. If they know that and are going to keep their cars longer it's OK for them. They want to sell cars and SUV's and this is perfectably acceptable for Hyundai/Kia right now to offer a variety of rebates. It will be intersting to watch how the '06 Sonata is offered price-wise. It would be good to offer the cars(all models except maybe very low-end)at MSRP without rebates, as you said above.

backy

That is likely what Hyundai will try to do initially with the NF Sonata--no rebates. They typically do that with their new designs, e.g. the '01 Elantra, the Santa Fe, and the Tuscon. We'll see how long the rebates can stay off the NF Sonata. Problem is, the Sonata is not just competing against higher-priced models like the Accord and Camry, but also heavily discounted U.S. models like the Malibu. The mid-sized sedans market is a tough one.

smith20

Where do I post to talk more about rebates hurting resale value? I don't understand the economic concept at all. I can see how rebates reduce resale off the original MSRP, but not the initial transaction price. If the consumer pays less for the car upfront, they'll get less when they sell it.

As I understand it, car reliability and desirability affect the resale value of a car. If a car is reliable, it will market better as a used car and command a higher price. If a car is desirable (low supply, high demand, or both) then it will command a higher price. But how is a rebate on the car years earlier going to motivate a potential buyer to offer less for a car other than the value of that rebate?

Those factors, in my opinion, are what causes a GM produced car to lose a greater percentage of its value than say a Honda or a Toyota.

What thread would be appropriate to continue this conversation?

delta4

Rebates are systemic to an auto industry that relies on "pre-factory discounts" to drive sales of their slow selling models. What Hyundai should do is make certain that they are 10 to 15 percentage points less than their competitive targets and hold the line on MSRP.

Having said that, any discounts that the consumer realizes should come in the form of good old fashion negotitiations. Of course the market demand for the NF Sonata will dictate in large part whether any pre-factory discounts will be offered and what dollar amounts. Typically Toyota and Honda have hovered around $500-1,000.

It is hard to foresee what percentage of captive market share Hyundai will realize from loyal Honda or Toyota owners (maybe a tough sell?)who are die-in-the-wool "brand believers". They may however tempt some to cross-shop and this may help the brand capture some in this coveted target market.

To move the brand closer to both Honda and Toyota the benchmark and the bar must be raised even higher and so too must the perception. My opinion is that Hyundai may be close to exceeding the quality mark but the question is how "close" will Hyundai be to raising the bar over the competition?