Hyundai and Kia

In 2008 the Korean won depreciated 28 percent against the United States dollar. Does this imply the Hyundai and Kia were wrong to invest in United States? How does this explain the relative strength of car sales from Hyundai and Kia in the U.S. market during early 2009?

2008年韩元贬值28％，对美国的美元。这是否意味着现代和起亚是错误的投资在美国？

这如何解释在2009年年初的汽车销量从现代和起亚在美国市场的相对强度？

Answer:

No. Because

Although the won depreciated 28 percent against the U.S. dollar, Hyundai and Kia did the right thing investing in the United States. Their investment offers the companies a hedge against future exchange rates. Besides, between 2007-2009, the US went through a recession. During this recession, the automakers were able to utilize their low price strategy and increase sales. While lower prices for the automakers yield lower profit margins, it also ensure increased sales. While profits continued to decrease, sales steadily increased. While the won depreciated against the US dollar, the Japanese yen increased in value.

This is good news for the Korean automakers as this helps them against their Japanese competition. “A surging yen is amplifying the effect of a falling won on Korean exporters that compete with Japanese rivals for global market share. Since the start of 2008, the won has lost some 5% of its value against the dollar, bucking the trend of major currencies that have recently appreciated. The yen, on the other hand, is up 11% this year against the dollar. The diverging swing represents a 24% decline for the Korean currency against the yen since last July, making prices of Korean exports that much cheaper against rival products made in Japan. That's a reversal of a 34% gain in the won's strength vs. the yen during an 18-month period ending in mid-2007” (Ihlwan, 2008). This means that America is more likely to purchase a Kia or Hyundai before purchasing a Toyota.

Even with a devaluation of the Korean won, there are still a lot of growth opportunities in the United States. As their vehicles...