By Park Jin-hai
Hyundai Motor, struggling with a dwindling domestic market share against imported automakers, has come up with aggressive incentive programs to lure customers.
The company will offer a 36-month installment program carrying no interest for its three popular models ― Avante, the new LF Sonata and Sonata Hybrid.
The limited offer for May enables customers to pay 20 percent of the price and the rest in installments over 36 months. If customers pay in a lump sum, they are entitled to a 500,000 won discount.
This is the first time in 18 years that Hyundai Motor has launched a no-interest installment program.
It means the company will shoulder a greater financial burden to boost sagging domestic sales.
Hyundai Motor also increased incentives for upper-tier models like the Grandeur sedan and Santa Fe SUV. On top of that, if an import vehicle driver trades in his or her car for one of Hyundai’s luxury sedans, the Genesis or Aslan, this month, the customer will receive a 500,000 won cash payment.
Hyundai has offered a variety of favorable financing programs in recent months.
It lowered interest rates on installments to 2.6 percent from 2.9 percent for Grandeur models this month. It has also cut interest rates for SUVs and other models.
The drastic incentives come as its domestic market share slipped below 70 percent in June for the first time. It has not been able to regain that 70 percent market share in the 10 months since.
In contrast, foreign carmakers are expected to raise their market share to 20 percent by the end of the year from 15 percent in June.
To make matters worse for Hyundai, foreign carmakers in recent months have lowered the price of their cars by up to 20 percent to clear out stock before September, when stricter emission standards kick in.
“Since we posted a record-low 65 percent in market share and see some sign of recovery, we have turned more aggressive to crawl back over 70 percent,” said a Hyundai Motor official.
Analysts said Hyundai and Kia might see a rebound in sales thanks to the incentives.
“Thanks to the new car effect for its Sorento and Carnival, Kia’s sales increased 10.3 percent last month,” said Shin Chung-kwan, an analyst at KB Investment and Securities. “Hyundai’s domestic sales are not bad at all. Thus the promotional incentive this time should be viewed as a strategy to fight against foreign auto brands in its dominant local market.
“Sedan sales have been weak since customers’ attention has been focused on SUVs. But, if the incentive program jumpstarts sedan sales, it will be an opportunity for them to rebound in local market share.”
Hyundai and Kia logged lower-than-expected sales during the first four months of this year. Hyundai aims to sell 5.05 million cars this year, and Kia’s target is 3.15 million. The two are pushing to sell a combined 8.2 million vehicles, up 195,000 from last year.
But sales figures so far this year have dimmed their target-beating prospects. During the January-April period, Hyundai Motor sold a cumulative 1.62 million cars, down 2.9 percent from a year earlier. Kia’s sales also dropped 2.4 percent on-year to 1.02 million.
The slower-than-expected sales were attributed to less overseas demand, affected by unfavorable market conditions such as the weak yen. Hyundai and Kia saw their overseas sales shrink 2.7 percent and 3.9 percent, respectively, from a year earlier, during the first four months of this year.