This year has been heralded the year of the car, as the big US car firms prepare for a showdown in passenger cars with Japanese manufacturers. Yet neither side can afford to ignore the competitive threat emerging from South Korea.
Hyundai and Kia Motors, which are linked through cross-shareholdings, are relative newcomers to the North American market, but they have grown rapidly since they started selling basic, low-priced passenger cars imported from South Korea in the late 1980s.
From 1998 to 2000, sales of Hyundai vehicles grew faster than those of any other car-maker in the US. The car-maker sold about 400,000 vehicles in the US last year - a record for Hyundai, and one that poses a threat to Toyota and Honda, which themselves started in the US 30 years ago by offering low-priced passenger cars. It also threatens Detroit. GM, owners of the Saab and Opel, recently refocused attention on entry-level vehicles by importing the Aveo, a small car made by its Daewoo affiliate in South Korea under a different name, and re-badging it as a Chevrolet. Ford is also studying ways of returning to entry-level cars, a segment it abandoned in 1997.
Entry-level cars are important because they offer a platform from which car-makers can persuade first-time buyers to graduate to larger, more expensive vehicles made by the same manufacturer.
For Hyundai, growing sales in the US are crucial to its goal of boosting its global sales ranking to fifth by 2010. It expects to make about 20 per cent of its global sales in the US by then. And next year, production starts at a $1 billion assembly plant in the US, Hyundai's first manufacturing presence there.
Kia has also gone to great lengths to spur sales of its vehicles in the US. For instance, it is offering dealers $300 per vehicle sold if the dealer agrees to become an exclusive Kia dealership.
Yet it may not be long before the entry-level passenger car market gets too crowded for some manufacturers. Mindful of this, Hyundai and Kia have broadened their product range to sport utility vehicles and minivans.
"We want to move beyond the perception of being the proverbial cheap car, and more towards offering value," says Bob Cosmai, chief executive of Hyundai North America.
That explains why Hyundai will focus on competitively priced, better-equipped sedans with features such as leather seats and electronic gadgets typically found in expensive luxury vehicles offered by competitors.
Nevertheless, South Korean car-makers must prepare for the day when China's aspiring car-makers attempt to break into the world's largest vehicle market with entry-level passenger cars of their own.
Bob Lutz, GM vice-chairman, suggests that Chinese car-makers, like their South Korean counterparts, may start by establishing design studios in California and applying those designs to vehicles made domestically and shipped to the US. "A lot of the volume would come at the expense of the Koreans and Japanese," he says. "Every wave of Asians will take some share away from the more mature Asians. And the one difference between Korea, Japan and China and the reason you would take a slightly more benign view towards Chinese cars coming to the US is that China at least has fostered a climate where western automobile companies can grow and prosper, which is more than you can say for Korea or Japan."