Japanese automakers are weary as they keep a watchful eye on Hyundai Motors and its affiliate Kia Motors. The two companies combine to make the world’s fourth largest automaker by sales and despite this economy we are in, they are making money hand over fist.
The Japanese are worried because as Reuters reports, “South Korea last month inked a tentative trade pact with the European Union to add to list of more than 40 free trade agreements (FTAs) with countries ranging from the United States to India. Japan has less than a third as many, almost all of them with the rest of Asia.”
To make matters worse for the Japanese companies, the government seems none-too-concerned about the yen’s rise against the dollar and is promoting a platform based on an increase of domestic demand. The automakers are worried about the value of the yen and pine for the government to ensure that the auto industry, which drives the national economy, remains competitive.
Ingenious marketing and government measures to encourage the purchases of fuel-efficient vehicles have allowed Hyundai to gain strong market-share. Aside from their increased share, the company has also defied industry-standard profit margins; For the period July-September Hyndai posted a net profit of $847 million. Honda and Toyota combined for earnings of the same amount for the same period.
Many industry insiders however believe that Hyunda/Kia has just been the beneficiary of fortunate circumstance, and that these numbers will not last as the Japanese have more flexibility in their production and more experience in the business than do the Koreans.
– By: Stephen Calogera