Kia’s expansion challenges Hyundai

With popular new models, Kia Motors Corp. is continuing to expand its share in the domestic market posing a major challenge to its sister firm Hyundai Motor Co.

Hyundai’s mid-sized sedan Sonata has slipped yet further in the country’s bestselling car list in July, marking the second consecutive month of downward movement. 

In July, 8,469 Sonatas were sold on the local market, down 14.9 percent from the previous month. In addition, July was first time the current model’s sales have fallen under the 9,000 line since its launch last year.

With the changes, the Sonata was ranked as the third bestselling vehicle in the local market behind Kia Motors Corp.’s new mid-sized sedan K5 and the city car Morning. 

For the Sonata, last month’s fall in the rankings marks the second slip in as many months. In June, the first full month with the K5 available, the Sonata was knocked off the top spot to second place. 

Hyundai’s decline in the local market is not limited to the Sonata. 

Hyundai’s share of the local market stood at 50.8 percent for the first half of last year, but fell to 45.2 percent during the same period last year.

In contrast, that of Kia rose from the 31.1 percent recorded for the first six months of last year to 32.1 percent for the same period this year. 

Kia K5

While some have taken the developments as cannibalization of Hyundai’s market share by Kia, the company says that the K5 has complimented the joint group’s sales. 

“If Kia’s sales in the mid-sized market increased while the combined figure for Hyundai and Kia stayed the same, it would clearly be cannibalization, but that is not the case,” a Hyundai official said. According to the Korea Automobile Manufactures Association’s data, 20,630 units of the current Sonata and the K5 were sold in June. In comparison, the combined figure for the Kia Lotze and the NF Sonata for June last year was 17,922.

The Lotze was Kia’s mid-sized model replaced by the K5 and the NF Sonata is the fifth generation Sonata that was replaced with the current model YF in September. 

In addition, Hyundai officials say that Sonata’s slip up could also in part have been caused by last year’s tax incentive, which sapped this year’s demand.

Hyundai Sonata

Following Sonata’s launch in September, its monthly sales soared to over 17,000 units in October, fueled by “the new car effect” and the tax incentive that cut related taxed by as much as 2.5 million won ($2,100) for new vehicles purchased to replace those registered before December 31, 1999. 

Kia Morning

Industry experts, however, disagree. 

“It is cannibalization, and it is likely to continue. Looking at other vehicles like the Sportage R, it maybe that Hyundai’s styling is out of sync with local consumers,” said Eugene Securities analyst Park Sang-won.

However, Park said that cannibalization of Hyundai’s market share by Kia is unlikely to effect Korea’s largest carmaker in the wider market. 

“But as Hyundai vehicles do well in the U.S., its effect on overall sales will be limited,” he said.

“Although the K5 and others have received good reviews and their launch (overseas) in the second half will change Kia’s image, the fact remains that Hyundai has a better brand image outside of Korea.”