China Slowdown Delays Hyundai NA Capacity Decision

MINNEAPOLIS, MN – Hyundai was expected to announce new capacity for North America this summer, but the seemingly unraveling Red Dragon is delaying that decision.

“It scares everybody when a huge growth engine like China slows down, so at this point we’re stepping back and trying to evaluate where everything’s at,” Hyundai Motor America CEO Dave Zuchowski tells WardsAuto here during a ’16 Tucson CUV media preview.

He said in May a decision on where and when Hyundai would add output in North America could come by late August.

But China’s stock markets have lost a third of their value in the past month, and many corporations doing business there fear consumer confidence is beginning to suffer as a result.

Those concerned about waning confidence point to the fact passenger-vehicle sales in China fell 3.2% in June, the first monthly drop in sales of cars, MPVs and SUVs in the country in more than two years.

But before the June dip, Hyundai already had been having a tough year in the world’s largest auto market, with its sales through May off 3.5%.

Presumably Hyundai is concerned if the China slowdown persists, it could have too much capacity globally. The automaker has four Chinese vehicle-assembly plants and broke ground last month on a fifth, a $1.3 billion facility in Chongqing.

“It’s fair to say that we’re slowing down a little bit because the world is changing quite quickly,” Zuchowksi says.

While more North American capacity in the form of a new plant or a new assembly line still is under “intense study,” there’s probably less urgency for Hyundai to make a move now than there was three months ago, he says, citing other ways to obtain units for the U.S.

For instance, Hyundai now is building more Tucson CUVs at its plant in the Czech Republic. This frees up capacity in South Korea, where the compact CUV is assembled for the U.S.

Thanks to the added builds in Korea, HMA hopes to sell 90,000 Tucsons next year in the U.S., up from the 40,000-50,000 it sold per year since 2010.

The next-generation Tucson goes on sale in the U.S. in late July.

Meanwhile, Zuchowski says it still is not clear what role, if any, Hyundai will play in Kia’s forthcoming Pesqueria, Mexico, plant.

The assembly site, due to come online early next year, will be an export hub for  compact vehicles to the U.S. and Latin America for Hyundai’s sister brand. The Forte C-car will be the first model to go into production in Pesqueria, Kia has said.

Hyundai currently produces its C-car for the U.S., the Elantra, at its Montgomery, AL, plant, as well as in South Korea.

Despite Mexico emerging as a compact-car production source for the Mazda3, Nissan Sentra and, soon, the Forte, Ford Focus and Toyota Corolla, Zuchowski says Alabama-built Elantras still have a good profit margin for the automaker.

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