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We are worried about Hyundai: Toyota

Hyundai's path to success has been modelled closely on Toyota's strategy of striving for top quality.

india Updated: Jan 11, 2006 16:45 IST

Toyota Motor Corp, one of the world's most successful automakers, claims to be afraid of a lot of things: complacency, competition, and success itself.

But in the United States, rival Hyundai Motor Co may well be at the top of Toyota's list.

"We're worried about them," Yukitoshi Funo, chairman of Toyota Motor Sales USA, told reporters in Detroit this week.

"Our main competitors here are essentially Honda Motor Co Ltd, Nissan Motor Co Ltd and Hyundai, but Hyundai is the one we are very carefully watching," he said on the sidelines of the North American International Auto Show in Detroit.

South Korea's top automaker, until recently a target of jokes about broken-down parts, has dramatically raised its profile on the world stage with a benchmark study by research firm JD Power showing an improvement in quality to match the best Japanese brands.

Hyundai now sells far more cars than Volkswagen AG, Mazda Motor Corp and Subaru in the US.

It expects sales to rise more than 10 per cent this year to over 500,000 units, in an overall market that it reckons will shrink.

In 2005, Hyundai's sales fell 7.7 per cent to 418,615 units, giving it a market share of 2.5 per cent.

"The quality story is resonating," Bob Cosmai, Chief Executive Officer of Hyundai Motor America, said at the Detroit show.

"We're broadening the depth of our product line, and it's a great value story. When I joined the company at the end of 1990 we sold 90,000 cars, so we're making our presence really known."

Unveiling the remodelled Santa Fe sport utility vehicle at the show, Cosmai said its popular model would be priced "thousands of dollars" below a comparably equipped Toyota Highlander with six airbags, electronic stability control and other advanced safety features.

As Cosmai admits, Hyundai's path to success has been modelled closely on Toyota's strategy of striving for top quality and competitive prices, and appealing to a broad range of customers with wide-ranging cars.

That's what worries Toyota most.

"Honda and Nissan are also formidable rivals, but they have a distinct business approach and profile from us," Toyota's Funo said. "Hyundai, meanwhile, is essentially doing what we're doing."

But Funo added that Toyota would not and could not compete with Hyundai on prices, and would instead focus on building its brand and value.

"Our costs aren't as low as Hyundai's. We don't want to compete on their terms," he said.

His Hyundai counterpart, meanwhile, seemed to be adopting Toyota's characteristic modesty when asked how the South Korean company stacked up.

"I'm not sure anyone's a big threat to Toyota right now," Cosmai said.

"They're a very successful company," he said, adding that Hyundai benchmarked much of its processes and design characteristics around Toyota. "We have a long way to go."