SYDNEY - In a scenario reminiscent of its history in Canada and the United States, Hyundai Motor Co.'s fast sales takeoff in Australia has tripped on quality and resale-value issues.
Hyundai became Australia's top-selling import marque in 1995, and has held the title ever since. It held 8.3 percent of the market in 1997, based on sales of 59,798, up from 4 percent in 1994.
But in a market that rose nearly 12 percent last year for a new record, Hyundai's sales slipped 4.5 percent to 57,219, yielding only a 7.1 percent share. While that share is still more than 1 point ahead of No. 2 import Nissan Motor Co., it marks the Korean automaker's first significant stumble in Australia.
Behind the decline: A badly handled recall of 46,000 vehicles to correct cracked frames.
Late last year, Hyundai agreed to install 16 stainless steel rivets to strengthen underbody welds in all 46,000 Excels sold in Australia that were built between August 1994 and March 15, 1996. Cracks in the underbody in the area securing the right front suspension and wheel could cause wheel separation and loss of steering. The problem was caused by improper voltage going to a welding robot at Hyundai's plant in Korea.
The cost of the fix was estimated at about $5 million Australian, or about $3.2 million U.S. at current exchange rates.
But without notifying all owners, Hyundai had already repaired 46 Excels and modified 178 others for the problem, when the Federal Office of Road Safety began an inquiry. That is when Hyundai ran into criticism, by not immediately issuing a recall.
'While they were delaying, it left us open to criticism' that Australia's system of voluntary recalls was inadequate, and should be replaced by a system relying on government mandates, said David Morgan, president of the Federal Chamber of Automotive Industries and president of Melbourne-based Ford Motor Co. Australia.
But Hyundai Automotive Distributors Australia Pty. Ltd. insisted on calling the repair a customer service campaign, not a recall.
'I really didn't care whether it was a recall or not,' Managing Director Doug Croker said in a telephone interview.
'Our customers saw it as a safety issue, so I did. Within a couple of days, we decided to recall all 46,000 cars, because we'd had five or six cars' develop problems.
Now the question is whether the Korean brand can recover quickly.
'We would have reached our target of 60,000 but for the subframe issue,' Croker conceded.
Mitsubishi Motors Australia Ltd. Managing Director Michael Quinn does not think Hyundai sales will suffer long-term because of the tempest. But, he added, 'people are going to be surprised' by their car's low resale value.
Hyundai in Australia is highly reliant on price-driven budget shoppers.
The Excel, its entry-level car, accounted for 78 percent of 1998 sales, selling largely on price. It was advertised heavily at year-end at $13,990 Australian with air conditioning and a CD player, compared to $19,000 Australian for the Toyota Corolla.