Hyundai Maintains Momentum, But How Far Can It Go as Just One Brand?

Hyundai just keeps rolling along. The latest testament to the stunning rise of the Korean brand in the U.S. market is its industry-best showing in J.D. Power's much-watched customer-retention study, announced this week. Last night, Hyundai's growing relationship with its customers also was recognized in its first award in annual prizes sponsored by R.L. Polk, another industry research analyst.

That was after the new Hyundai Elantra won North American Car of the Year honors at the North American International Auto Show in Detroit. And as company executives continued to make a case for how they can stretch the Hyundai brand from its original value positioning into what Hyundai of America CEO John Krafcik calls recognition as a "valuable brand" with a vehicle roster that runs from spartan to opulent.

Power's exhaustive surveying of U.S. automotive consumers led to its conclusion that Hyundai had the highest customer-retention rate last year among auto brands, with 64 percent, beating bigger competitors Ford and Honda, who scored 60 percent. BMW finished in a tie for fourth with 59 percent, with Hyundai's sibling brand, Kia.

"Hyundai's increased retention rate is shaped by its expanding model lineup, as well as the fact that perceptions of the brand's quality and appeal have continued to improve during the past decade," said Raffi Festekjian, J.D. Power's director of automotive product research.

But like everything else about Hyundai's breathtaking climb, holding onto customers it captures is no accident. The brand took a decisive turn in this direction when it launched the industry's first 100,000-mile powertrain warranty several years ago, which helped immensely in overcoming initial hesitancy by American consumers about Hyundai's manufacturing quality. The launch of its Assurance program three years ago, promising to forgive payments on new cars if purchasers lost their jobs, engendered incalculable loyalty toward the brand. And the appeal and performance of Hyundai's products have taken over from there.

Still, Hyundai isn't a brand without challenges. The biggest may simply be: how far can brand stewards stretch it? Hyundai executives insist that they can carve out a new type of uber positioning for the brand as "modern premium" that will sufficiently encompass a product line that runs from the little Accent hatchback, priced under $15,000, to the new Equus sedan that nearly pushes $60,000.

Each of the big three Japanese brands chose to bifurcate their luxury offerings from mainstream models into new luxury brands as they grew in America: Honda/Acura, Nissan/Infiniti, and Toyota/Lexus. Is Hyundai that much better or different than those master car sellers?

It's possible. But more likely is that Hyundai eventually moves determinedly upscale while a corporate decision is made to give Kia the lower end of the market.