Another Advantage For Hyundai

About a month ago, I wrote about how well Hyundai is weathering the economic storm, which is particularly severe in the auto space. Its market share is expanding faster than any other carmaker. Other than the fact that it produces cars for cheaper than its rivals, and has recently edged up on the quality ratings rankings, it has another ace in the hole: a weak domestic currency.There's one thing good about a weak currency. It makes nation's goods cheaper to foreign consumers. As I noted a few weeks back, that's why Asia wants to make sure the dollar doesn't get completely slaughtered: a weak dollar would endanger how inexpensive Americans find Asia's goods. Hyundai is benefitting from the Korean won's relative value remaining lower, while many of its Japanese rivals are plagued by a stronger yen. Bloomberg reports:

Japan, which barely emerged from recession in the second quarter, may see its expansion cut short as the exporters it depends on for growth cede business to South Korean rivals. Toyota is contending with a yen that has risen against all 16 major currencies in the past two years, including the dollar, euro and Korean won, eroding profit and leaving little room for price cuts. The won's 22 percent slide versus the dollar let Hyundai give discounts and almost double its U.S. market share.

The yen has soared 61 percent over its Korean counterpart over the past two years, trading at 12.90 won at the close yesterday in Tokyo.

Consequently, Hyundai's vehicle prices can decline even further than its mere lower costs would imply. In a U.S. where consumers will only consider opening their wallets for huge deals, cheap products matter more than they have in some time. As the Bloomberg piece mentions, this advantage extends to other South Korean manufacturers too. Samsung and LG are two notable examples. Clearly, Japanese consumer electronics manufacturers will suffer here as well.

This article available online at:

http://www.theatlantic.com/business/archive/2009/10/another-advantage-for-hyundai/28778/