Why Hyundai Sticks By Its Warranty Offer

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.

Source

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