Ssangyong Hopes G4 Rexton Matches Tivoli’s Success

Ssangyong is banking on its just-launched G4 Rexton fullsize SUV to give the South Korean automaker a sorely needed earnings boost.

The G4 Rexton went into serial production April 24 at the Pyeongtaek assembly plant and sales launched May 1 at dealerships throughout Korea. The 2017 sales target is set at 20,000 units, with 30,000 deliveries projected for next year.

Ssangyong has logged more than 3,500 sales since it began taking orders April 15, and unofficially has hit the 5,000 mark.

On the Korean market the G4 Rexton is competitively priced for a large SUV at 35.5 million to 45.1 million won ($31,000-$39,700).

The new vehicle, which initially will sell alongside the aging Rexton W, arrives just in time to help offset a dismal first-quarter performance by Ssangyong, which reported a net loss of 13.9 billion won ($12.2 million), compared with a net profit of 2.3 billion won ($2 million) a year earlier.

Ssangyong also reported a first-quarter operating loss of 15.5 billion won ($13.6 million), compared with an operating profit of 8.1 billion won ($7.1 million) in first-quarter 2016.

Sales for the quarter were dragged down by underperformance in overseas markets, with exports declining 10.6% to 9,878 units. Domestic sales were up 7.6% at 24,350.

The first-quarter performance was a letdown from the records achieved in full-year 2016, when Ssangyong reported its best result in 14 years with 155,844 vehicles sold, a rise of 7.7% over 2015.

The 2016 lift mainly was provided by sales of Ssangyong’s Tivoli compact SUV, called the Tivoli Air in export markets. Tivoli sales for 2016 totaled 85,821 units, a rise of 35% over 2015, and accounted for 55% of global deliveries.

For full-year 2016 Ssangyong broke into the black with its first net profit in nine years. Net profit was 58.1 billion won ($51 million) versus a loss of 61.9 billion won ($54.4 million) in 2015. Operating profit was 28 billion won ($24.6 million), compared with a 2015 operating loss of 35.8 billion ($31.4 million).

Ssangyong attributes the negative result in first-quarter 2017 to the strength of the Korean won, which is making Korean vehicles less attractive in world markets because of higher costs, and to increased production and service costs in the domestic market.

The first-quarter loss was disheartening following Ssangyong’s first positive full-year financial report since Indian conglomerate Mahindra acquired 73% of the company’s shares in 2011.

Analysts note Mahindra never has viewed Ssangyong as a reliable revenue source, instead looking at the company’s vehicle- and production-technology synergies as a valuable asset.

Mahindra, for example, is developing its own compact SUV in India, the S201. Based upon the Tivoli platform, the vehicle will qualify for India’s small-car incentives, which should enhance its price attractiveness.

Mahindra also plans to launch the new vehicle as a strategic export brand.

Both companies also are working together on a range of new engines, drawing heavily on Ssangyong’s diesel-engine technologies acquired from Mercedes-Benz. Since then Ssangyong has made its own mark with globally competitive diesel engines.

The G4 Rexton, for instance, is offered with Ssangyong’s own 2.2L diesel mill, not a more powerful V-6 3.0L engine that many analysts had anticipated. The smaller-capacity engine was chosen to bring an “affordable premium vehicle” to global markets, say Ssangyong officials who also note there is a trend in the industry to downsizing engines.

While the G4 Rexton debuted in March at the Seoul auto show in 5-seat format, Ssangyong says a 7-seat configuration will launch later in the year.

The vehicle is offered with an adjustable electric-powered running board designed to help children and shorter adults access the seats.

The G4 Rexton will launch in Europe and other export markets near year-end.

Ssangyong long has nurtured the dream of breaking into the U.S. market. But for now it is free from concerns about a reworking of the Korea-U.S. free-trade agreement that President Trump has declared will be renegotiated soon. Trump’s stance has Hyundai, Kia and GM Korea concerned about possible negative effects on their exports to the U.S.