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Hyundai is having its best year in Canada, largely because its been the first to break through the four-figure barrier. A Hyundai Accent, a perfectly decent little car, can be bought for $9,995.

For cheapskates like me, this destroys a significant psychological hurdle — 10 grand. Brand new? Let me at it; and while Hyundai is first, they won't be the last car company that veers down into four figures.

Fuel prices are rising, food prices are rising, taxes are always rising, but the price of cars is coming down. As well, today's small cars are the most economical and the cleanest ever.

Alright, dismiss me as a car company shill, which I am not, but even my coolly analytical friend, Dennis DesRosier, gets all worked up and excited when he points out the price deflation in today's automotive market.

Take a look around. In something bigger, a Dodge Caliber can be had for 13 large including an economical CVT (continuously variable transmission). In the smalls, the Honda Fit starts at $14,980 and the Toyota Yaris Hatchback starts at $13,165.

Small cars today drive better than big cars of just a few years ago. I'd take a road trip in any of those listed above.

The paradigm is shifting and Hyundai got to four figures first.

Vaughan: Tell me about the decision to break the four-figure barrier.

Kelleher: You know how tough the market is.

There's the interesting exchange rate situation that came up — actually, it helped us.

We read into the market that consumers were no longer interested in APRs (Annual Percentage Rate).

Sure, now they jump on the Internet and check everybody's prices.

That's right, they are really conscious of price.

So from that came our 25th Anniversary Pricing marketing campaign and it wasn't only on the Accent.

C'mon, the headline was Accent $9,995.

That was the attention-getter for sure, and it did the job.

Did many go out the door at that price or did you up-sell them?

Yes, some people just wanted the $9,995.

But this wasn't a last-minute strategy.

What we did was make sure we had the inventory to back up the proposition.

Otherwise it's bait and switch. You've got to have it, if you advertise it.

Exactly.

And that's one of the things that made it successful. Customers were going in and the cars were there to take away. You can't say, "Well we don't have it today."

We had a pretty good idea that the Accent was going to be successful at that price, but we were hoping it would spread across the line and that is happening.

I'm all for aggressive pricing, but the danger is, oh it's a "cheap car" and that's the whole image problem with Hyundai. It goes back years.

And even though you're now getting J.D. Power quality scores as good or better than Honda and Toyota, they can get a higher price for comparable vehicles. It must frustrate you greatly.

Yeah, it does frustrate us.

The awards for the Elantra and Santa Fe from Consumer Reports — they're volume vehicles — finally, we're getting the recognition.

But still it hasn't translated into that gap between us and Toyota and Honda.

The shift to small is on because of gas prices, isn't it?

It's the whole market — what a shift because of this oil price.

This is a dramatic shift, bigger than anything I've ever seen, not just away from trucks to cars, but, man, that low end of the market is just exploding.

And I think the low end of the market is not low enough — it's just being driven so hard that way.

Our company, not just from what we have here, but from a manufacturing standpoint, can really address that.

We just have to convince everyone over in head office that we can economically justify bringing those really small vehicles to Canada.

Well, Chrysler's talking about getting a sub-sub-compact from Chery of China and that will be below $9,995. So you think some day you'll have something under the Accent?

Everybody's going to have something under the Accent — it's just a matter of who's going to get there first.

Gas or electric?

That's a good question.

We have lots of things happening on alternative fuels. But our focus right now is on fuel efficiency, maybe diesel coming into the picture, but initially gas.

At the other end of the market, Hyundai Genesis arrives this summer, the luxury car which you are going to sell right next to the $10,000 Accent.

Luxury cars have luxurious dealerships. Can you sell the Genesis out of a Hyundai shop?

All our Hyundai dealerships meet a very high standard today, but that is an issue.

The Genesis is a whole new step up for Hyundai — it's our first real performance luxury sedan — and I think we have a real shot at taking away some Acura and Infiniti people.

But who knows what the future will hold? Down the line, if we have a portfolio of products, I wouldn't rule out separate Genesis dealers.

One last question: even on that $10,000 Accent, a Canadian consumer is paying $600 import duty.

If we get a free-trade deal with South Korea that import duty goes away; but the domestic manufacturers point out that while Korea exports about 130,000 cars to Canada, Canada exports zero to Korea.

Are you in favour of a free-trade agreement?

I think anything that makes trade easier is good.

I don't buy all the arguments that have been thrown around about South Korea being that closed a market.

As a Canadian, I think over all a free-trade agreement with South Korea would be of benefit to Canada.

Michael Vaughan is co-host with Jeremy Cato of Car/Business, which appears Fridays at 8 p.m. on Business News Network and Saturdays at 2 p.m. on CTV.