Do Today's Cars Cost Too Much?

ANN ARBOR -- (WWJ) As car sales bounce back in a big way this year, we're also seeing something else rise. The average transaction price--what people actually pay--is pushing $35,000. It's already topped $40,000 for full size pickup trucks.

"I think it's a huge industry problem," says Hyundai North America CEO John Krafcik.

The higher prices are also raising the age of the average new car customer into the 50's. Krafcik is concerned that this could keep people out of the market for even less expensive vehicles. Hyundai's average transaction price is just under $23,000.

"I do worry personally, with those manufacturing prices and MSRP's increasing," he said. "But, we manufacturers always find a way in the end to keep cars affordable."

Hyundai has another more pressing near term issue, meeting consumer demand. They are on track to sell 734,000 vehicles in the United States this year, which would be a record for the company. However, Krafcik says Hyundai could sell more, if they had more.

That won't be easy. While Hyundai may be able to import a few more vehicles from overseas, Krafcik says they won't be able to get anything extra from their plants in the U.S.

"We could not get a single incremental unit. We've tapped everything at this point. We're three shifts in Georgia, maximum overtime. And, we're three shifts in Alabama, maximum overtime."

The shortage of vehicles, Krafcik says, is allowing Hyundai to focus on other things, like residual value and customer service. He spoke at an event introducing a new Equus luxury car.

Having a vehicle that attracts premium buyers has allowed Hyundai dealers to learn more about customer service.

"It's been a big benefit for the brand," says Hyundai premium brand manager Ricky Lau. "What we found is our dealers are learning for that premium luxury experience, and providing an elevated level of service for owner who don't have an Equus."

Hyundai refined the exterior of the Equus, and added more technology and more creature comforts on the interior. There are two trims. The Signature stickers for 61 thousand dollars. The Ultimate for 68 thousand. That's a $1750 price increase over the previous model

Hyundai says that gives the Equus an $11,000 price advantage on a similarly equipped Lexus LS and a 37 thousand dollar price advantage on a Mercedes S Class with similar options.

The Equus is one of two premium vehicles being sold by Hyundai. The other is the Genesis. Hyundai promises to introduce a brand new Genesis at the 2014 North American International Auto Show.

Also, Hyundai's John Krafcik presenting a $250,000 check to Mott Children's Hospital in Ann Arbor. It's a donation to battle childhood cancer, as part of Hyundai's "Hope on Wheels" program.

"We target research institutions, like U of M and Mott's Children's, and clinical areas and therapeutic areas, where we think the most good can be done. We're big fans of the work being done at Mott."

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