Hyundai and Volkswagen Lose U.S. Auto Race

24/7 Wall St.

To the amazement of many, U.S. car sales are at an annual run rate of 16 million vehicles. That comes close to matching the record years of 2006 and 2007, before the recession. The improvement has spread across most of the manufacturers. Total light vehicle sales rose 17% in August to just over 1.5 million. The only large car companies that were well short of that pace were Volkswagen and Hyundai, along with its stablemate Kia. Each is on its way toward being a bottom-tier car company in terms of American sales.

No car company can afford to miss being part of the U.S. auto sales success. Not with the catastrophe in Europe and slowing improvement in the world's largest market -- China. Sales in the People's Republic may be hampered for a long time as the government turns its attention to air pollution in its largest cities.

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Both Hyundai and VW have a great deal to lose as their market shares erode in the United States. VW claims it is on a path to pass General Motors Co. (GM) and Toyota Motor Corp. (TM) as the world's largest car company. Hyundai's sales put it in fourth place among all global manufacturers. It needs to have a growing share of the American market to keep that place as well.

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VW has not had much success in the United States since the Beetle model, which did well in the 1960s and early 1970s. The German manufacturer sold only 40,342 vehicles in the U.S. last month, which was down 1.6% from the same month a year ago. That puts it behind niche manufacturer Subaru, and well behind the Big Three and major Japanese car makers. VW's lack of success has been blamed on the low grades its cars get for quality and a limited line up of models.

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Kia and Hyundai were among the fastest selling brands in America for three years. But their sales have slowed considerably since about the same time as a scandal that involved its claims about how many MPG several of its vehicles got. The company was forced to revise its figures, which cannot have helped it with consumers. Hyundai sold only 66,101 cars and light trucks in August, up 8.2%. Its performance year to date is worse than that. Kia's sales for the month of August were up only 4% to 52,025, and year-to-date sales were also weak.

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The quality of U.S. and Japanese cars targeted to the general market -- and Audi, BMW, Mercedes and Lexus targeted the luxury portion -- will make it very hard for VW and Hyundai to gain any footing. Neither company will enjoy the benefits of renaissance of the American auto industry.

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