TRAVERSE CITY, MI –Motor America President and CEO John Krafcik says the auto maker’s U.S. fleet will achieve 50 mpg (4.7 L/100 km) by 2025.
Krafcik admits the pledge ranks as yet another lofty goal from, even though the auto maker’s fleet is heavy with passenger cars.
“Is that a stretch target? Yeah,” he tells the annual Management Briefing Seminars here. “Is it a classic Hyundai stretch target where we don’t know precisely how to get there right now? Yeah, but we do have a road map.”
Hyundai is working toward the goal at research centers in its home country of South Korea, as well as in the U.S., India and Germany. Technologies will run the gamut – from downsized turbocharged gasoline direct-injection engines to electrification and lightweight materials and design.
But the old-fashioned internal-combustion engine will play the predominant role, comprising 75% to 80% of Hyundai’s propulsion systems in 2025. About 15% would be electrified hybrids and the remaining 5% fuel-cell vehicles.
“We want to lead the industry in fuel economy,” Krafcik says. “We do it now. We want to set the trajectory, not just for Hyundai but the entire industry.”
Hyundai took over the lead in U.S. industry fleet fuel economy in 2008. It is projected to lead again in 2009 at roughly 31.9 mpg (7.4 L/100 km) after the government finalizes industry totals.
The current corporate average fuel economy standard calls for auto maker fleets to achieve 35.5 mpg (6.6 L/100 km) by 2016. Rule-making for 2020 will get under way soon.
Krafcik says “an important piece” of Hyundai’s fuel-economy pledge will be unveiled later this year at the Los Angeles auto show.
“When you see this car,” he says, “and the fuel economy results we’ll announce with it, you’ll get a sense” for how 50 mpg could be attained.
Krafcik tells journalists the plan also could include a vehicle attaining 60 mpg (3.9 L/100 km), because the new CAFE rules are figured based on a “footprint” equation. That means with all of its small passenger cars, Hyundai must post some big fuel-economy numbers to move the needle for its fleet.
Krafcik says the Hyundai fuel-economy target does not come without precedence.
In 2000, Hyundai management set the lofty goal of becoming the fifth-largest auto maker globally. It was 10th at the time and by 2007 it reached its goal. It now ranks fourth behindCo., AG and Motor Corp.
Hyundai also improved quality with a stretch goal of having the best reliability in the non-premium segment in the U.S. In 2001, it ranked 32 out of 37 brands in the annual J.D. Power & Associates Initial Quality Study.
“Really horrible quality performance and people’s opinion of Hyundai was similar,” he says.
By 2004, Hyundai ranked seventh out of 37 brands.
“It was an interesting and telling example of what can be done when the entire organization aligns behind a seemingly impossible task and just has the will to go and get it done,” he says.
Hyundai’s performance in Consumer Reports studies also continues to improve, Krafcik says, and as a result residual values have improved and consumer consideration of the Hyundai brand has grown.
In 2000, just 7% of Americans had Hyundai on their shopping list. Today, one-third consider a Hyundai, and retail market share has grown to 4.9% through June compared with 3% in 2008, he says.
“We are building a base of American buyers.”
Krafcik also says the auto maker likely will eclipse 500,000 sales in the U.S. this year, a goal Hyundai thought it might reach in 2008 when it sold a company-best 470,000 units.
Much of the auto maker’s optimism comes from the new-for-’11 Sonata midsize car. As of the second quarter, Hyundai was averaging 15,000 units a month. Hyundai could move 20,000 monthly if it could find capacity at its Montgomery, AL, assembly plant, Krafcik says.
Hyundai plans to announce a strategy to increase Sonata capacity in the next four weeks, but Krafcik says the auto maker’s sales goal for 2010 does not hinge on further accelerating Sonata deliveries.
“It would be helpful,” he tells Ward’s, declining to say whether Hyundai might lean on its partner Kia Motors Corp. and its West Point, GA, plant for the extra capacity. “But we could do it without it.”
“Whatever we do is going to be a very investment-efficient approach,” he adds, saying dealers are “absolutely tapped out” on Sonata inventory.
On the powertrain front, Krafcik expresses pessimism over diesel engines for U.S. light vehicles, but not for the traditional reasons of development costs, lukewarm consumer acceptance, limited availability and a price premium at the pump.
Instead, he simply thinks the gasoline engine is stealing the best technology of diesels. “We all have great optimism over how far we can go with the internal-combustion engine,” he tells journalists.
Krafcik also makes news at the conference by accepting the event’s annual Wu Manufacturing Leadership award, named for longtime University of Michigan manufacturing professor Sam Wu.