Hyundai cruises in fast lane but speedbumps near

Seoul, Detroit: For Hyundai Motor Co, things could hardly be going better: last month, it won top marks in a US quality survey, its sales rose in a sliding global market and even its share price is back up above pre-crisis levels.

Not bad for a carmaker long seen as a distant second choice to Japan's best brands. Now, Hyundai is giving Toyota Motor Corp, Honda Motor Co and Nissan Motor Co a run for their money as quality improvements change consumers' image of South Korea's top automaker.

Thanks to a big presence in the robust Chinese and Indian markets and a focus on fuel-conscious small cars, Hyundai and affiliate Kia Motors Corp boosted their combined sales by five per cent last year to 4.16 million vehicles. That makes the group the world's fifth largest automaker and best performer among the top 10.

Last month, Hyundai's worldwide sales grew 9.6 per cent from the previous June - the first rise in eight months in a global vehicle market that has shown little sign of recovering.

But while many expect Hyundai's successful run to last in the near term, some warn of speedbumps ahead.

Analysts said Hyundai had lucked out with a weaker won, which made South Korean exports cheaper, giving it the windfall with which to splurge on marketing. The currency, however, has rebounded 26 per cent since hitting an 11-year low against the dollar in early March, threatening to temper Hyundai's charge.

"Hyundai was able to weather the downturn of the global car market as a weaker won allowed it to pour money into marketing, but now it cannot just keep spending," said HI investment & Securities analyst Choi Dae-sik.

And success on the back of currency tailwinds could always come with the baggage of political pressure, others said.

"The US government's first priority is to help its own market recover and Washington will press Hyundai and Kia to produce more there," said Michael Sohn, auto analyst at Woori Investment & Securities.

Hyundai is also in catch-up mode when it comes to the next generation of fuel-efficient cars.

Although it has a fuller diesel car line-up in Eur-ope than Japanese rivals, it could lose out if hybrids gain in popularity in the United States as Toyota and Honda push the technology into the mainstream with low-priced gasoline-electric models.

"We are seeing a revolution in the global auto market led by hybrids," said HI's Choi. "If it weren't for that, we could say that the Golden Age for Hyundai has arrived. But Hyundai's hybrid technology lags others, especially Japanese makers."