The Excel Has Landed a $4,995 Car Could Be the Latest

By Barbara Rudolph.

All the big names were at the Houston Auto Show: General Motors, Ford, Chrysler, Volkswagen, Toyota and Nissan. But the name that attracted the most attention was a new one: Hyundai (rhymes with Sunday). Hyundai is the first South Korean company to export cars to the U.S. At the Houston show and at the National Automobile Dealers Association convention in New Orleans, Hyundai last week unveiled its new Excel, a front-wheel-drive subcompact with an enticing base price of $4,995. The company is launching Excel with a $25 million advertising campaign and confidently predicts that it will sell 100,000 vehicles in the U.S. this year. That is not a modest mission: no foreign importer has ever come close to selling that many cars during its first year in the American market.

But no one is discounting the South Koreans. In the past few years, several Korean companies, including Samsung, Goldstar and Daewoo, have successfully invaded America with television sets, videocassette recorders and even personal computers. Because wages are generally lower in South Korea than they are in either the U.S. or Japan, Korean products often sell for 25% less than their competition's. By offering attractive items at very low prices, the South Koreans may become the new Japanese. Says one Tokyo businessman: "Sometimes we see our spitting image in the Koreans, and we're downright afraid."

Price-conscious American consumers, though, are delighted. Robert Tout, a 29-year-old textile worker in Carlisle, Ky., owns a Samsung 19-in. color television set, which sells for about 50% less than a Sony of the same size. Says he: "I had no idea it was Korean when I bought it. It's good stuff." Though some consumers are wary of the quality of Korean imports, many others are impressed by the manufacturing standards. Jaclyn Jerabek, a research scientist at Columbus-based Battelle Memorial Institute, owns a Korean-made personal computer. Says she: "I made a good choice. I would go out right now and buy another one."

The popularity of the Korean goods has helped swell the U.S. trade deficit, which reached a record $148.5 billion in 1985, according to new figures released last week by the Commerce Department. Last year's deficit with South Korea amounted to $4.8 billion.

The Koreans have been exporting to the U.S. for decades, primarily selling such industrial products as textiles and, since the early 1970s, steel. Only recently have Korean firms begun to sell a variety of consumer goods. They first entered the mass market indirectly. In 1979 Samsung began making television sets that are among those sold in Sears stores as the company's house brand. Similarly, J.C. Penney started selling microwave ovens manufactured by Goldstar in 1983.

Three years ago, Goldstar built a plant in Huntsville, Ala., to manufacture color television sets bearing the company's own name. Consumer response was swift and positive. Since 1983, Goldstar's revenues from TV sales have more than tripled, to $100 million in 1985. TV sets with the Samsung label have also become brisk sellers.

Samsung and Goldstar have recently made equally impressive inroads in the market for videocassette recorders. Five years ago, the Korean companies turned to Japanese manufacturers to provide the necessary technology to make VCRs. In return, the Koreans delayed their entry into the U.S. market until 1985. Their belated arrival in American shopping malls ten months ago has sparked a classic price war. The price of a no-frills VCR has fallen from about $350 to $200. Though Japanese manufacturers have slashed prices to meet the competition, Korean companies may have already won 5% of the American VCR market.

Daewoo's IBM-compatible personal computer, known as Leading Edge Model D, has been selling well since it was introduced last year. At $1,495, it costs about 45% less than an IBM PC. Says David McDonough, co-owner of five Computerland outlets in San Diego: "It doesn't bother the customers where the computer comes from. It's price and performance that counts."

No business arena is more alluring to Korean manufacturers than the U.S. auto showroom. Americans bought some 11 million cars last year for $131 billion. Hyundai, whose Pony subcompact is already the best-selling import in Canada, may be able to capitalize indirectly on the lofty reputation of products made in Japan. Says Edward Klein, a Canadian auto dealer who sells the Pony: "People perceive it as a quality car because it comes from the Orient." That perception has some foundation: Japan's Mitsubishi owns 15% of Hyundai and supplies the technology for the Excel's engine and transmission.

+ The Excel is certain to intensify competition among makers of small cars. The rivals include Ford's Escort (base price: $6,052), Chrysler's Omni and Horizon ($6,209), the Toyota Tercel ($5,598), the Nissan Sentra ($5,649) and the Honda Civic ($5,649). Admits one Detroit executive: "The Excel will be a formidable competitor for everybody in the low end of the market."

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With reporting by Cristina Garcia/Los Angeles and William J. Mitchell/Detroit