Korean car companies sold 109,000 units in May, according to car research firm Edmunds. That would put the sales of Kia and stablemate Hyundai ahead of Japan’s Honda (NYSE: HMC) and Nissan. The two Korean firms would fall behind GM (NYSE: GM), Ford (NYSE: F), Toyota (NYSE: TM) and Chrysler. And, the distance between Chrysler and the Koreans would be a modest 4,000 units. Edmunds projections would not have to be off much for Chrysler’s sales to trail Kia/Hyundai.
The success of Kia and Hyundai is particularly impressive since domestic car sales are expected to fall 5.1% from April. Part of this is due to a fall-off in Japanese car and light truck inventory along with a decline in incentives. High gas prices and an unsteady economy don’t help either.
No matter what the cause, Nissan, Honda, and Chrysler may never be the same because of the Koreans. This has to be especially threatening to Chrysler, which recently paid $7.1 billion to cover loans made to it by Canada and the US as it emerged from bankruptcy. Chrysler plans an IPO next year.
Most experts who looked at the future of the car industry two years ago expected Toyota, the world’s No.1 car company, to gain US market share and perhaps even to pass GM. The Chapter 11 filings of GM and Chrysler were supposed to damage their abilities to develop and market new cars. Ford, which avoided bankruptcy, was also expected to do well along with the second-tier Japanese manufacturers Nissan and Honda.
Car sales for May will show how little predictions can mean. Toyota’s fortunes have been shattered by recalls and the Japan earthquake. GM and Chrysler have rocketed out of Chapter 11 successfully. Ford has performed as well as expected.
What no experts predicted, however, was the rise of Hyundai and Kia. That does not make their success much different from the Japanese four decades ago when it was assumed in most quarters that GM would have a US market share above 40% forever and that Ford and Chrysler would continue to profit as well.
Hyundai and Kia’s success shows that forecasts are meant to be proven wrong.
Douglas A. McIntyre
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