levels of quality in its cars and expected its designers, engineers, and manufacturers to deliver. By 2009 this strategy was beginning to pay off. Hyundai’s quality was becoming the equal, if not superior in some metrics, to that of its Japanese rivals.
The quality improvements came incrementally over a decade. But in 2009, in one grand and unexpected flourish, Hyundai shocked the auto industry when it debuted a groundbreaking new design on its big-selling Sonata sedan. Called “Fluidic Sculpture,”the look was all curves and swoops. In one move, Hyundai had leaped from bland fast follower to industry design leader, forcing competitors such as Nissan and Toyota to overhaul or at least examine their own cars’ designs.
Critics favorably compared the new Sonata’s design to the Mercedes C-class. A bold character line swept along the side of the Sonata—Hyundai designers called it the “orchid stroke”—and it arced like a javelin in flight, giving the car a look of tension and velocity. Some Hyundai lifers considered the Fluidic Sculpture Sonata the first car of Hyundai’s modern era.
In subsequent years, new models, such as Hyundai’s Veloster, adopted the stylish and sporty new design. Existing models, such as Elantra and Accent, were redesigned to the Fluidic Sculpture form. For the first time, Hyundai had a distinct family look, one that was directly contributing to sales and, more important in the auto industry, to “conquests”—winning new buyers from other auto brands. A big chunk of Hyundai’s staggering 20 percent 2011 sales increase in the U.S. was attributable to Fluidic Sculpture. It was an astounding concept: people were buying Hyundai cars for their looks .
The new design helped Hyundai’s sales, but so did risky management thinking. When other automakers radically cut back on new product development during the Great Recession of 2008–2009—and while two of America’s Big Three were in bankruptcy—cash-rich Hyundai stepped on the gas and raced ahead with new product development. That meant that when the financial gloom began to lift in late 2009 and 2010, Hyundai had one of the industry’s youngest lineups of cars—striking new models that made the competition look old and stodgy. And it didn’t hurt that a relatively weak Korean currency made car prices in the U.S. and other overseas markets competitive.
Shortly after I arrived in Korea in 2010, Car and Driver putthe Hyundai Sonata on its annual list of Ten Best Cars—the first time any Hyundai had cracked the Car and Driver list. And yet, in late 2010, just as the company appeared to outsiders to be settling in for a long and profitable run as a high-quality volume carmaker, finally the equal to its Japanese rivals, continuing to build new factories and someday challenging to be the world’s biggest automaker—maybe even become the new Toyota—internally, Hyundai was planning something altogether different and much, much riskier.
Hyundai had looked around the auto industry and noticed a few things. If you go to a motor show in Shanghai or Beijing or Guangzhou, you’ll see the Chinese brands: SAIC, BYD, Great Wall, Geely, and so on. The reason you don’t see them on the streets of North America or Europe is they’re not good enough. Not high enough quality, not safe enough, not enough features. Yet. But soon they will be. And, thanks to tight cooperation with the Chinese government, they will be sold at prices that automakers such as Hyundai cannot beat without taking a loss. Hyundai knew that lower-priced rivals would come in soon at the bottom of its lineup and that the company could not compete on price.
Second, Hyundai looked at its Japanese rivals’ attempts to create luxury brands: Toyota’s Lexus, Nissan’s Infiniti, and Honda’s Acura. They offer seriously mixed results. Only Lexus is a true success, and it took years for it to become profitable—setting up an entirely new “sales channel,” or dealerships and