John Krafcik, CEO of Hyundai Motor America (HMA), says that the company has a mantra, of sorts, that defines what the company’s approach is: “Defy. Design. Delight.” Explaining the meaning behind the terms of what sounds more like a slogan for a creative studio rather than a car company (which may be a clue as to how and why Hyundai is doing remarkably well in the U.S market), Krafcik says of the first term, defy, “Only Hyundai, I think, would have a word like that.” Other companies would be rather more benign, not somewhat confrontational, or at least alternative. Although the company’s fortunes have risen almost astronomically in the last few years—in 2001 the company’s U.S. market share was 2%; in 2011 it was 5.1%; in 2011 its sales were up 20%, compared with an overall industry increase of 10%; it is the 6th best-selling brand in the U.S.; it has two of the top-10 best selling cars in the U.S. (#4 Sonata; #8 Elantra); and it accomplished this while having the lowest ($1,005) incentive spend in the industry—it is clear that HMA is still operating as a challenger brand in the market. Which explains the “defy.”
Krafcik points out that they’ve embraced the challenge of meeting the U.S. government’s fuel-efficiency standards and have had HMA personnel working with the regulators in developing standards. More than just talk, they’re putting their efforts into sheet metal: the 2016 CAFE target is 35.5 mpg; in calendar year 2011 Hyundai’s fleet average was 36.1 mpg. One of the means by which they’ve achieved this is by offering the midsize Sonata with a four cylinder engine (one is naturally aspirated, one is turbocharged) rather than a four and a six, which is the ordinary course in that segment. There is another available powertrain for the Sonata, a hybrid, which is one of the four cars that Hyundai has that gets 40 mpg (with the other three being the Veloster, Elantra, and Accent). According to Krafcik, these 40 mpg cars aren’t low-volume, special trim versions, but accounted for 33% of the company’s 2011 sales, 214,132 units.
The Design aspect is fairly obvious. While previous-generation Hyundais generally had designs that were either derivative or not particularly inspired, when the company introduced the 2011 Sonata, with its “Fluidic Sculpture” design language, it announced to the world that it was going to develop cars that were truly distinctive. While comp-anies often talk about the importance of design to their products, this is often more rhetorical than real. Hyundai has followed through on its design direction with the aforementioned Veloster, Elantra, and Accent, as well as with the Genesis Coupe and the 2012 Azera. The result of this effort is measurable: according to the J.D. Power 2011 APEAL study, Hyundai rated 8.6 out of 10 with regard to exterior styling, which is the highest ranking in the industry.
And as for Delight, Krafcik says that their approach in 2012 is one that is going to be driven by improving quality, with quality being put before increasing volume. He describes this as “a long-term, mature strategy,” one that he believes will have benefits in the years to come. (It’s worth noting that Hyundai is #1 in the industry as regards keeping customers in its brand, according to the J.D. Power 2012 Customer Retention Study.) Part of this is predicated on the fact that Mong-Koo Chung, chairman and CEO of Hyundai Motor Company, has announced that he’s capping the global production of Hyundai vehicles at seven million units for 2012. So knowing that there is a limit, they’re working to improve things under that limit.
“I’m a big fan of the Theory of Constraints,” Krafcik says. “There are a lot of things that you can focus on in life and business. Sometimes it helps you to have a clarifying constraint.” So in this case, the constraint is the number of units that will be produced. “Given that constraint,” he continues, “how am I going to optimize the other parts of my business to assure the future success of my business?” And the answer to that is to focus on quality.
Krafcik cites an approach that Hyundai takes that is different from many of its competitors: “No quality change waits for the next model year.” If there is a cause of dissatisfaction among its customer base, then they’ll make an in-cycle action to rectify it. This sort of thinking leads to customer delight.
While some people may object that this is an expensive approach, Krafcik points out, “Cost focus is a big part of who we are. Our company was founded on the idea of diligence, frugality and harmony. Frugality is something we’re really focused on.” So while other companies have a tendency to make midcycle replacements that are focused on reducing costs, he says that at Hyundai, “the changes aren’t focused as much on cost-down as quality-up. We don’t spend a lot of time—if any—feature de-contenting. I can’t think of the last time we took away a feature from the customer.”
Which essentially encompasses the “Defy. Design. Delight.”
Another word that could be part of the vocabulary: Relentless. Hyundai has been bringing new products to market with a cadence that is remarkable. They’ve had a program called “24/7,” which is about bringing seven new models to market over a 24-month period. And the seventh—following the Tucson, Sonata, Equus, Elantra, Accent, and Veloster—is the 2012 Azera.
The front-drive Azera is Hyundai’s “large car” offering, slotting between the front-drive Sonata (midsize) and rear-drive Genesis (mid-lux) sedans in positioning and in dimensions (below).
And as regards powertrain, while the Sonata has the aforementioned fours, the Azera has a 3.3-liter GDI V6 and the Genesis is offered with a 3.8-liter GDI V6 and a 5.0-liter GDI V8.
In terms of the competitive market set for the Azera, according to Michael O’Brien, HMA’s vice president, Product and Corporate Planning, the primary set includes the Toyota Avalon, Nissan Maxima, Buick LaCrosse, and Ford Taurus; the secondary set includes the Acura TL and the Lexus ES 350. When you look at that set and then compare it as regards powertrain or design engineering, the spreadsheet comes down on the side of the Azera (perhaps not surprisingly). For example, its 3.3-liter gas-direct injection engine produces 293 hp @ 6,400 rpm and 255 lb-ft of torque at 5,200 rpm. (It is mated to a six-speed automatic transmission.) Its fuel economy numbers are 20 mpg city/29 mpg highway/23 mpg combined. Its specific output is 88.8 hp/liter. While the 3.6-liter GDI V6 available in the LaCrosse bests the Azera’s engine as regards horsepower—303 hp @ 6,800 rpm vs. the 293 hp—in terms of specific output, the Azera’s 88.8 beats the Buick’s 84.2. Additionally, it has better fuel efficiency (LaCrosse: 17/27/21 mpg city/highway/combined).
As regards the coefficient of drag—the Azera sheet metal now sports the Hyundai Fluidic Sculpture design language—at 0.28, the Azera ties with the Toyota Avalon, whereas the figures for the other primary competitors are Maxima and LaCrosse at 0.31 Cd and the Taurus at 0.33 Cd.
The Azera is the biggest-selling car in Hyundai’s home market of South Korea. The car actually launched in South Korea about a year before it launched in the U.S. What’s interesting, however, is that according to John Shon, HMA manager of Product Planning, the South Korean market and the U.S. market are remarkably similar when it comes to mid- and full-size cars, so while there was certainly input from the U.S. product planning team regarding the features and functions of the Azera, the teams were pretty much aligned as regards what was necessary for their respective markets.
The Azera is being built at the Hyundai plant in Asan, South Korea.