Small-volume imports carve niche in U.S. car market Companies scramble to fill buyers' needs

THE BALTIMORE SUN

Last month, while Detroit's Big Three were trading jabs with Japan's largest automakers, the Daihatsu Motor Co. quietly announced that it would stop selling its Charade subcompact and Rocky sport-utility vehicle in the U.S. market.

That announcement, coming from one of Japan's smaller automobile exporters, caused only the faintest of ripples in the U.S. auto industry. After all, Daihatsu held only the tiniest share of the market -- 0.1 percent.

Still, Daihatsu's retreat marked the first time a Japanese car company had halted sales in the United States since Toyota temporarily pulled back more than 30 years ago.

But if Daihatsu was unable to crack the U.S. market, what then are the prospects for other small-volume nameplates such as Japan's Suzuki, Isuzu and Subaru, and South Korea's Hyundai?

They appear to be faring well. All but Hyundai had sales records last year that were better than the 11.2 percent sales drop for the total U.S. auto market. And Suzuki was one of only six brands to have had sales gains in 1991. But analysts concede the low-end, niche markets are especially tough places to be.

Competitive market or not, the "Little Four" are committed to the United States. They all have built assembly plants in North America. And their sales record in a down year is impressive given their mission: selling lower-priced vehicles to customers easily turned away by a recession.

These companies are also targeting customers who face a dizzying array of choices. Though Daihatsu will stop distributing its cars in five months, Kia Motors of South Korea said in January that it planned to start selling a lineup of utility vehicles next year.

"They're a brave organization," said Thomas Dukes, director of competitive assessment for J.D. Power & Associates. "This market just gets tougher and tougher."

In the early 1980s, established Japanese importers handed over a sales opportunity to their smaller rivals. In response to import quotas set by Washington, automakers such as Honda, Nissan, Mazda and Toyota started building pricier, more profitable cars, vacating the lowest-priced segment. Companies such as Hyundai and Suzuki charged in, capitalizing on price-conscious consumers.

When the automobile industry grew briskly in the late 1980s, there was room for everyone. Besides, profits on lower-price vehicles were too small to be of much interest to the biggest automakers. But as sales have turned down, automakers in every price category have been scrambling.

The Big Three, for example, have fine-tuned their pricing strategies to appeal to cost-conscious consumers. They have done this, in part, by offering low-cost leases.

For example, Oldsmobile began selling its new import fighter this year, the Achieva, with an unusually inexpensive new-model lease special of $199 a month, no money down, for four years. One leasing consultant estimated the incentive costs Oldsmobile as much as $2,200 per car.

"When big players are that aggressive, they can squeeze the small players out," said Susan Jacobs, an automotive consultant based in Little Falls, N.J. As a result, "the time for easy entry has passed," she said.

Despite the challenge of introducing a new car line in the United States, analysts note that there is always room for vehicles that capture the public's imagination. That was part of Daihatsu's problem, analysts say.

Though uniformly praised for quality and reliability, Daihatsu's entrants did not stand out. According to Ms. Jacobs, even the lowest-priced models must do more than simply match the competition in order to sell.

Indeed, the most successful start-ups can be traced to an automaker's ability to spot a niche and fill it quickly. Isuzu was the first to offer an inexpensive four-door imported sport-utility 11 vehicle with its 1984 Trooper model. They have sold briskly ever since, giving Isuzu 0.2 percent of the market last year. While that's not much compared with Detroit's, it's about average for the Little Four.

Suzuki began offering a compact sports utility vehicle in 1985 called the Samurai. Initially, this smartly styled vehicle sold well. But then Consumer Reports magazine, after testing the Samurai, deemed it unsafe in certain circumstances. Though other studies disputed these findings, sales dwindled. In 1991, Suzuki had just 0.1 percent of the market. Last year, it introduced a utility vehicle with four doors.

Subaru and Hyundai's offerings are more conventional. But both companies are trying to brighten their image. Subaru, which had 1.3 percent of the market in 1991, introduced its innovation-laden SVX sports car last year. It hopes to win buyers with gadgets such as windshield wipers with a winter "park" position for easier snow removal. While design of the SVX is unorthodox, its technology has won praise in the automotive press.

"A lot of people have a vision of us as very basic transportation," said Christopher B. Wackman, Subaru's vice president of marketing. "That's not necessarily true any longer."

Hyundai Motor America, the largest of the Little Four with 1.5 percent of the market, is also trying to energize its generic-design image with a striking two-seat sports car that it displayed at recent auto shows. Hyundai plans to introduce the car in 1995. Company officials say it is designed to compete with Mazda's Miata.

South Korea's Kia plans to create a new niche with a rounded, compact, sport-utility vehicle that is distinct from the traditional boxy designs other companies offer.

Analysts say the smaller manufacturers are often nimbler than the larger companies and can often bring out new models more quickly. That gives them a big advantage.

"Large companies frequently get muddled into community affairs and politics," said Thomas F. O'Grady, who heads Integrated Automotive Resources, a consulting firm in Wayne, Pa. "Sometimes the heads of companies get turned away completely from the company's goals."

Distinctive products are only part of a successful niche franchise; creative marketing and enthusiastic dealers are also important.

The smaller importers generally trumpet their products' value and hope the decline of conspicuous consumption will make their products right for the times.

Some new advertisements by Subaru and Isuzu, for example, poke fun at consumers who search for status in their vehicles. The message must be effective, analysts said, but also must be repeated frequently to be heard.

How tough is building name recognition? After five years in the United States, Daihatsu was regularly confused with Hyundai by consumers because of the common "dai" in their names. "It is hard to break through," said C.R. Brown, executive vice president of Daihatsu America Inc.

The smaller imports are also typically added on to an existing dealer's franchise to complement the core model lines. But when overlap occurs, the add-on is the first to go.

One dealer who sold Chevrolets and Geos in Phoenix, Ariz., dropped Daihatsu because its Rocky diluted sales of the Geo Tracker sport-utility vehicle.

hTC "If it ever gets to the point that they're competing with the big boys, they're asking for trouble," said Dick E. Strauss, president of the National Automobile Dealers Association. Strauss sells Fords in Richmond, Va., as well as Isuzus and Suzukis.

"Unless they offer the buyer something that is not available to them in any other lines, they can't compete," he said.

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