Hyundai Program to Guarantee Residuals

NEW YORK – Hyundai Motor America next month will give buyers a hard-and-fast figure of what their vehicle will be worth at trade-in after two to four years of ownership.

HMA CEO John Krafcik says the program, dubbed the “Hyundai Assurance Trade-In Value Guarantee,” is likely to appeal to those who typically lease a vehicle.

“One of the things we’re trying to do is determine what’s on a consumer’s mind and what they worry about, and depreciation is a big unknown,” he tells Ward’s on the sidelines of the New York auto show.

“Folks who lease cars have had this benefit, and a lot of people lease cars because it takes risk away from resale value.”

The program should help build consumer loyalty in the Hyundai brand, which already ranks among tops in the industry, Krafcik says.

However, he warns it may not lead to a volume increase, as the auto maker already is severely capacity constrained, running its factories at full tilt to meet current demand.

“We’re doing well right now,” he says. “In the past year or so, we’ve been selling at capacity. Sales and brand interest is growing, but we’re somewhat limited by production constraints.”

The tight supply may prevent Hyundai from reaching 600,000 vehicle sales this year, Krafcik says. Through March, Hyundai’s U.S. deliveries tallied 142,620, according to Ward’s data.

Krafcik says demand outpacing supply.

“We could hit 600,000 units if we had availability, but that may be an issue.”

Production has not been affected by the earthquake and subsequent tsunami that struck Japan on March 11, he says, noting the only problem related to the natural disasters has been a shortage of xirallic, a paint additive sourced from Japan that adds a sparkle to a car’s finish.

“There’s an industry-wide shortage of xirallic,” Krafcik notes. “We’re looking for alternatives to provide the same look and feel.”

He says consumers have been flocking to Hyundai dealerships as gasoline prices rise. The auto maker’s lineup ranks among the best in fuel economy, with four models achieving 40 mpg (5.8L 100/km) on the highway.

Krafcik says Hyundai continues to concentrate on improving the fuel efficiency of its internal-combustion engines. While pure electric-vehicles hold promise, he says the best way to benefit today’s buyers is to improve upon existing technology.

The auto maker also has made it a goal to reduce vehicle weight with every new model, largely by employing advanced materials such as high-strength steel, an area where Hyundai has a distinct advantage.

“We’re one of a few auto makers that have its own integrated steel plant,” Krafcik says. “We have a team of 300 metallurgists, chemists and materials engineers working to design special alloys. It’s a tremendous strategic advantage for us right now.”