It’s Hyundai rather than the up-and-coming Chinese or the leaner meaner Americans that has the Japanese seriously worried.

Talk to any Japanese motor company executive and he is likely to say the South Korean car company is rapidly emerging as the most feared competitor to Japan’s world-leading car companies.

“Hyundai is awesome,” said Honda chief executive Takanobu Ito. “They are undoubtedly a threat because their products are cheap, and the quality is improving.”

Nissan senior vice-president Shiro Nakamura agreed. He compared the rise of Hyundai to Samsung Electronics, which has grown to rival Japan’s Sony, and said its cars were riding on their reputation for quality and affordability.

It might take another decade for China’s carmakers to start seriously competing with Nissan, but Hyundai was there already, he said.

“Hyundai is the biggest threat for the Japanese carmakers,” Nakamura said. “They have the technology, but they seem to have cheaper labour.”

To compete, Japanese manufacturers needed to start relying more on their creative “sensibilities” to add value to a product almost like a European designer bag, Nakamura said. Buyers must want to pay more in the same way Japanese gourmet delicacies called kaiseki command higher prices than some Korean dishes.

“We have to offer the equivalents of sushi, tempura and kaiseki to compete against Korean barbecue,” Nakamura said.

Hyundai, which has Kia as an affiliate, recently grabbed a 5 per cent global market share for the first time, despite a declining global market.

These days, Hyundai and Kia form the world’s fifth-largest automotive group and have seen sales surge in the United States and Europe, with only Toyota, the world’s biggest carmaker, outselling it among the Japanese.

In the US, Hyundai was the only one among the major vehicle makers, including the Japanese, to record better sales last month, up 27 per cent from September 2008.

The Japanese have been battered by the financial crisis, although they are counting on expansion in emerging markets to offset declining sales in established markets such as the US, Europe and Japan.

Christopher Richter, analyst at Calyon Capital Markets Asia in Tokyo, said that Hyundai was growing not only in the US market, where it was taking advantage of a weakened General Motors to grab sales, buthas been strong for years inmerging nations, such as China and India.

Although the Korean won and Japanese yen had been strengthening, eroding the value of overseas earnings for both exporting nations, the yen’s jump had been bigger, further putting the Japanese at a disadvantage, Richter said.

“They are not an act you want to dismiss lightly,” he said. “They are increasingly going to create a bigger challenge to the Japanese.”

Hyundai spokesman Oles Gadacz said the company had no comment.

Tokyo-based Honda has emerged from the global recession in better shape than the other Japanese carmakers.

Honda’s Ito acknowledged as possible threats the US manufacturers, including GM and Ford, which have been reshaping their businesses and preparing smaller fuel-efficient models that are likely to better compete against Honda models.

But he appeared to be merely being polite in talking about the Americans and turned adamant when the topic became Hyundai. “Its growth is fantastic.” NZ Herald.