Hyundai Has Huge Jump In Residuals And Brands As “Modern Premium”

ALG, a leading provider of residual value information, announced that the Hyundai brand made a big jump in predicted residual values for the coming year.  Hyundai ranked No. 3 in ALG’s 2012 Residual Value Awards, based on ALG’s forecast for January through December 2012.  They ranked No. 7 a year ago.

“We don’t usually see that much movement in only a year,” Eric Lyman, director of residual solutions for ALG said. “That’s a huge improvement.”

This should mean more leasing opportunities for Hyundai in the long run.  A higher residual value implies lower monthly payments. In leasing, the customer in effect borrows the difference between the upfront cost of a vehicle and its predicted residual value at the end of the lease.

Hyundai averaged 17 percent lease penetration for 2011, up from 12 percent in 2010, Hyundai spokesman Dan Lienert said.  According to the Power Information Network, the industry average for lease penetration was 19 percent in the third quarter.

The Hyundai Elantra won ALG’s compact car segment for the highest residual value.  The Elantra was also named North American Car of the Year this month at the North American International Auto Show in Detroit.  Separately, the Elantra also won a 2012 Polk Automotive Loyalty Award with a customer-retention rate of 27 percent.

Hyundai wants to capitalize on this rise in customer awareness and loyalty.  In just a few short years, Hyundai has positioned itself effectively as a company known for manufacturing cars of excellent quality, above-average warranties, and state-of-the-art amenities at very affordable prices.  Now, however, the Hyundai corporation wants to take their branding one step further.  Coining the term “modern premium,” Hyundai eschews the supposition that “premium” means “high priced.”  On the contrary, says Chung Eui-sun, “Today, customers do not believe that expensive cars with unnecessary technology are premium. Instead, they want their core needs fulfilled at an accessible price and with a car that exceeds their expectations; a car that reflects their values and the times in which they live.

“Hyundai is not just a company that makes cars. Hyundai is a company that creates new possibilities. Our goal is not to become the biggest car company. Our goal is to become the most-loved car company and a trusted lifetime partner of our owners,” Chung continues.

John Krafcik, CEO of Hyundai Motor America, said the brand is quickly shedding its image as a purveyor of cheaper new cars and becoming a major player in the global industry.  Hyundai has raised transaction prices 14 percent since 2009, all the while maintaining a strong reputation for value.  Hyundai has also cut vehicle rebates to just 18 percent of its incentive spending in 2011, down significantly from just three years ago.

“The orthodoxy inside the company just three or four years ago was, seriously, ‘We can’t sell a car without a rebate on the hood,’” Krafick said.

Hyundai boosted U.S. sales 20 percent to 645,691 vehicles in 2011, which included a 41 percent gain in Elantra sales and a 15 percent gain in Sonata sales.  On the whole, the American market rose 10 percent last year.

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