Hyundai Motor America and Kia Motors America Inc. are looking to extend their big gains of last year by pouncing on the troubles of Toyota Motor Corp.
Fountain Valley-based Hyundai Motor America, part of South Korea’s Hyundai Motor Co., and sister company Kia Motors America of Irvine are offering discounts for those who trade in Toyotas for Hyundais or Kias.
“We have had a lot of traffic these past few weeks,” said K.C. Heidler, executive vice president at Santa Ana’s Kia Depot. “A large number of them were people who originally were looking at Toyotas but who now are shopping around.”
Toyota’s troubles couldn’t come at a better time for Hyundai and Kia. The two are among just a handful of automakers to grow sales last year amid what’s been the worst industry downturn since the early 1970s.
Hyundai sold 435,064 vehicles last year, up 8% from 2008. Kia sold 300,063 vehicles, up nearly 10%.
The automakers’ fuel-efficient, inexpensive cars and sport utility vehicles proved good fits with the down economy.
Now Hyundai and Kia are looking to build on their gains.
The automakers “have been smart to capitalize on the misfortunes of Toyota by leveraging the concern some owners have in their cars” said Rick Volpe, sales training director at Irvine-based Tuttle-Click Automotive Group, which runs an Irvine Hyundai dealership. “It’s all about the public mindset, especially with autos.”
Offers
Hyundai has offered $1,000 off some models if a buyer trades in a Toyota.
Kia is paying $500 as part of its competitive bonus program, which allows drivers to trade in a Toyota Camry or Avalon for a Kia Sorento crossover vehicle.
Hyundai and Kia aren’t alone in offering deals. The average discount on autos rose 11% in February from January to $2,588 per auto, according to Santa Monica-based Edmunds Inc.
Consumer confidence in Toyota, the largest seller of autos in Orange County and nationwide, has been shaken due to recalls, congressional hearings and other scrutiny.
More than 8 million Toyota cars, sport utility vehicles and trucks have been recalled with talk about even more being looked at for potential repairs.
The company’s problems seem to be helping Hyundai and Kia extend their streaks.
Nationally, Hyundai saw an 11% gain in auto sales in February from a year earlier with 34,004 autos sold. Kia saw sales up 9% to 24,052 autos.
“We are seeing a lot more consideration for our products as a result of what is going on with Toyota,” said Michael Spague, vice president of marketing at Kia.
Toyota saw sales fall 9% last month as sales of 11 models were put on hold. They included the Prius, Camry and Corolla.
The Japanese automaker estimates it lost about 18,000 sales last month due to the recalls.
The bad publicity has put Toyota dealers in a tough spot.
“Toyota Motor overreacted when they erred on the side of caution, which in my mind created this frenzy,” said David Wilson, chief executive of Orange-based David Wilson Automotive Group, which runs Toyota of Orange and other dealerships. “There is nothing wrong with the cars. It became a media crisis because it seems a lot scarier than if a hose starts leaking oil on your floor.”
The saving grace for Toyota dealers is that the automaker is paying them to make repairs to recalled vehicles, keeping them busy.
For the most part, the fixes are fairly simple, taking less than an hour to complete.
“We’re doing about 50 to 100 cars a day in response to the recall,” Wilson said. “Honestly, millions of cars have been recalled for something that is not likely to happen. But it’s a precaution by Toyota.”
Toyota isn’t lying down while Hyundai, Kia and others attempt to lure away consumers.
The automaker’s U.S. arm has launched its most aggressive marketing efforts to date, trying to reassure auto shoppers and aiming to spur sales by offering 0% financing on its top-selling vehicles.
“They are probably spending 25% of their incentive marketing budget in the month of March,” Wilson said. But the rebates and cheap financing may not be enough to offset public scrutiny of Toyota and its handling of the recalls.
“It is probably going to cost us business,” Wilson said. “If they were trying to decide between Toyota and Honda, it’s likely we lost them to Honda.”
Before the recalls, nearly 75% of potential buyers considered Toyotas, Wilson said. Now that number has dropped to “neutral,” he said.
Wilson said he and other Toyota dealers are banking on the automaker’s long history of reliability and owner loyalty.
“We have built up a lot of Toyota loyalty and goodwill over the years,” he said. “Toyota has set the gold standard for reliability and safety for more than 20 years. That didn’t change overnight.”
In the Meantime
For now Hyundai and Kia dealers are happy to play to buyers who would have passed over them in the past.
“With Kia, especially in Orange County, we just have not been on the shopping list when people are looking for a new vehicle,” Kia Depot’s Heidler said. “In the last year, we have gotten on people’s shopping lists thanks in part to Kia’s marketing and products—but also now thanks to Toyota’s fumble.”
About 20% of the business last month at Kia Depot was from Toyota owners looking at other options, Heidler said.
“That counts people who came in or called, which is something we didn’t see in the past,” he said.
Toyota’s woes come amid a marketing push by Hyundai and Kia that has included Super Bowl and Academy Awards commercials.
“We have not let up from a marketing or public relations standpoint, but we wouldn’t have let up either if Toyota wasn’t going through these issues,” Kia’s Spague said.
