Hyundai: The newest U.S. auto power

The Hyundai Genesis is the automaker's first entry into the luxury market.

NEW YORK (CNNMoney.com) -- In a year of unprecedented turmoil for the U.S. auto industry, one major car maker has emerged as a winner. And that company isn't based in Detroit, Japan or Europe.

South Korea's Hyundai Motor Group has gained significant ground against its more established rivals this year. In fact, the company, which has separate operations for its Hyundai and Kia brands in the U.S., is the only one to report sales growth this year.

U.S. sales for General Motors, Ford Motor (F, Fortune 500) and Chrysler Group, as well as Japan's Toyota Motor (TM), Honda Motor (HMC) and Nissan (NSANY), are all down between 25% to 50% from a year ago. But combined U.S. sales for the Hyundai and Kia brands are up 2.6%.

As a result, the two brands have picked up 2.2 percentage points of market share during the first nine months of 2009. Hyundai and Kia now combine for 7.4% of the U.S. auto market.

That puts Hyundai Motor Group just ahead of Nissan as the sixth-largest automaker in terms of U.S. auto sales. And the Korean automaker is rapidly closing in on Chrysler, which now has just a 9.2% share of the U.S. market.

"They're definitely considered one of the major automakers today, which was definitely not the case this time last year," said Jesse Toprak, vice president of industry trends for car pricing tracker TrueCar.com.

So how has Hyundai become such a significant threat to Detroit's Big Three and the Japanese auto giants?

Industry experts said that Hyundai has primarily been a beneficiary of the economic downturn.

High gas prices steered buyers away from the pickups and SUVs that had been a mainstay for Detroit's Big Three to more fuel efficient cars that are Hyundai's specialty. That trend accelerated thanks to this summer's popular Cash for Clunkers program, which gave buyers money to buy a new car if they traded in their old gas guzzler.

Hyundai's and Kia's combined U.S. sales leapt 30% over the course of July and August compared to a year earlier. The rest of the industry suffered a 7% decline in sales over those two months -- despite a boost from Cash for Clunkers.

The company also has been able to steal share because its vehicles typically cost less than similar models from rivals. Lower-priced vehicles obviously appealed to buyers squeezed on credit or worried about their jobs.

That has helped Hyundai steal share not just from its troubled Detroit rivals, but also from Toyota and Honda -- despite these Japanese automakers' similar focus on smaller cars.

"Fundamentally the market has come to them," said Jeremy Anwyl, chief executive officer of auto industry tracker Edmunds.com.

But now that Cash for Clunkers is history and many economists are talking about an end to the recession, will Hyundai continue to gain ground? Company officials said that it will be a challenge but expressed confidence.

"We've done a great job of lifting our brand this year. We're on lists we weren't on before," said Dave Zuchowski, vice president of U.S. sales for Hyundai. "But we're going to keep our foot on the gas. We have a lot of work to do."

Zuchowski admits that Hyundai uniquely benefited from the economic downturn and the hit that the rest of the auto industry took. He compared it to the effect that the oil shocks of the 1970s and early 1980s had on helping the Japanese automakers to establish themselves with U.S. buyers.

But Hyundai also made some savvy moves to take advantage of the trends moving the market in its direction.

In January, the company rolled out its Hyundai Assurance program, which allowed buyers who lost their jobs to return their cars without penalty. A month later, Hyundai added a new wrinkle to the program. The company agreed to cover three months of payments for buyers that were looking for work.

The program helped drive up awareness of the Hyundai brand. GM and Ford Motor (F, Fortune 500) eventually came out with their own version in response to Hyundai's success.

Hyundai also did a better job than most of its rivals of preparing for demand from Cash for Clunkers. In the spring, as many U.S. auto plants were idled due to weak sales, Hyundai raised production at its U.S. plants from four days to five to give it adequate supplies in anticipation of the program.

The company also guaranteed its dealers they would get the up to $4,500 payments per car sold under Cash for Clunkers directly from Hyundai, rather than having them wait for reimbursement from the government.

That turned out to be a smart move. Dealers for many of Hyundai's competitors ran into a cash crunch due to slow government payments, which limited the ability of some rivals to fully reap the benefits of the program.

Hyundai has also been taking advantage of the troubles facing General Motors and Chrysler. The company has grabbed dozens of U.S. dealerships or facilities cut loose by GM and Chrysler as part of their bankruptcies.

Experts say that Hyundai may also get a lift as GM drops its Pontiac and Saturn brands in the coming months. According to research from Edmunds.com, people who've bought Pontiac or Saturn models in the past have also looked at Hyundai models before making their purchase.

Hyundai has stepped up its marketing efforts as well -- and at a time when many competitors were pulling back on how much they spend on promotions.

The company advertised during the Super Bowl for the first time ever in 2008 and did so again this year. The company also had a commercial during this year's Academy Awards. Zuchowski said Hyundai is looking for more high-profile sponsorship opportunities going forward.

Experts almost universally praise Hyundai for the success of its fuel-efficient Hyundai and Kia vehicles.

But even as many American consumers continue to shift to smaller cars, experts say that Hyundai has the opportunity to grab even more market share if it sold more trucks.

Light trucks still account for nearly half of U.S. auto sales. Hyundai has limited crossover and minivan offerings and has less than a 5% share of the light truck market.

There have been rumors that Hyundai is planning to introduce a pickup offering in the future. Zuchowski would only say there are no immediate plans for such a truck.

The company also has only one luxury vehicle, the Hyundai Genesis. By way of comparison, most other automakers have a full lineup of cars marketed under separate luxury brands.

Some experts say that Hyundai may need to come out with its own separate luxury brand if it is going to compete effectively in that higher-profit part of the market.

"Luxury buyers buy image, and the image of Hyundai is not on the short list for most luxury buyers," said Toprak. "You're going to have a tough time selling a $50,000 Hyundai, even if the car is worth that kind of money."

Still, experts say that Hyundai and Kia have a solid group of new cars ready to hit the market in the next few years, such as the redesigned versions of Hyundai's Santa Fe crossover and Sonata sedan and Kia's new Soul and Forte small cars.

"The early signals from their product pipeline is they should be very competitive," said Jeff Schuster, executive director of global forecasting for J.D. Power & Associates.

Schuster added that as long as the company continues to do what it has been doing, Hyundai should be able to keep gaining market share. And that could mean that the once little South Korean car company may become an even bigger thorn in the side of both Detroit and Japan.