With Hyundai racking up awards for its
quality and reliability, could the brand get away with watering down its
industry-leading warranty coverage?
Extra-long
warranties are handy
marketing tools for challenger brands or those that have become tarnished by
questions about reliability. They were Chrysler’s ticket back to respectability
in the late 1980s and drove Hyundai’s
comeback in the early 2000s.
But Hyundai is a different brand
now, having not only risen fast in J.D. Power’s initial-quality surveys but
also risen to the top and expanded its lead. Its vehicles increasingly receive
critical praise for their design, luxury and engineering.
Other
brands that embraced longer warranty
terms as a sales tool have since walked away from them. Both General Motors and
Fiat Chrysler, which lengthened powertrain warranties to stoke new- and
used-car sales in the trouble years before bankruptcy, retreated to
5-year/60,000-mile limits this year on most of their volume brands.
Dave
Zuchowski, CEO of Hyundai
Motor America, says those competitors are prepared to do that because “it costs
them money” to keep up the extended coverage.
For Hyundai, he said, the cost of
offering what it calls “America’s best warranty” isn’t so significant. What is
significant for Hyundai, he says,
is the impact on brand consideration. Despite its considerable gains in quality
rankings and its vastly improved product portfolio, Hyundai still needs that
extra something to get on consumers’ lists alongside more esteemed brands such
as Toyota and Honda.
Zuchowski
cited results of a recent focus group in which participants were presented with
a choice of various warranty configurations, including a lifetime powertrain
warranty that would add some cost, along with the current offering, to see
which one was most likely to get them to consider buying a Hyundai.
The
winner by far, when well-explained, was the current offer -- 5 years/ 60,000
miles and 10 years/100,000 miles for the powertrain -- which boosted
consideration of the Hyundai brand
to 28 percent from 8 percent.
The warranty issue goes up for
renewal with headquarters in Korea every three years, Zuchowski said, and it
hasn’t been a tough sell.
“I
wouldn’t want to walk away from it,” he said.
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