Hyundai Has U.S. Sales Problems to Envy, Exec Says

CHICAGO – Hyundai is red-hot in the U.S., no more so than in the South, where successful dealers are being rewarded with additional stock amid a supply squeeze.

"We divide the U.S. into five regions,” Bob Pradzinski, executive director-national sales for Hyundai of America, says at the auto show here. “The South is our best region, and our dealers there turn cars the fastest of any other region in the country.

“So when it comes time to dividing up the product we sell in the U.S. this year, the South is going to get a few extra cars," he says. "As our sales rose in the U.S. from 400,000 to 500,000, to 600,000, and then to 700,000 annually, our dealers in the South had the highest percentage (of revenues) to invest in new facilities."

The upgrades, in turn, have spurred sales gains rewarded by the auto maker with extra product. That’s a big incentive at a time when Hyundai’s U.S. inventories are constricted, Pradzinski says.

"We only get 734,000 vehicles to sell in the U.S. annually, but all our plants are at max capacity,” he says. “As industry sales rose to 14.5 million in 2012 from 12.7 million in 2011, our allotment from Hyundai was capped at 734,000 vehicles, and still will be capped at 734,000 in 2013 when industry sales are expected to top 15 million.

"With supply capped at 734,000 units, even if industry sales rise this year to 15.1 million or 15.4 million units as forecast, we aren't going to show a percentage sales gain and our market share will drop. So it will look like we didn't do well and sales retreated, when in fact we actually sold as many cars as we are allowed.

"Our U.S. plant (in Montgomery, AL, which builds the Sonata and Elantra) is maxed out at 360,000-unit production on three shifts and two Saturdays each month, so we can't get any more cars unless we work on one of those Saturdays.

“We aren't going to add bricks and mortar. There's no talk about that at this time," he says, but notes all Hyundai plants in South Korea are stretched to capacity as well.

Newly opened Hyundai plants in Brazil, China and Russia could widen the product pipeline. "We aren't going to get cars from Brazil, China or Russia for the U.S., but production at those plants could free up some more output for the U.S. market."

Pradzinski says the Midwestern U.S. also enjoys healthy sales but could do better if it offered all- wheel-drive cars and not just AWD Santa Fe and Tucson cross/utility vehicles.

"We will have AWD in the next-generation Genesis in about one year and in the next Equus about two years later, the sooner the better,” he says. “The AWD Chrysler 300 accounts for about 70% to 80% of (the model’s) sales in the Midwest."

Hyundai’s success has raised Japanese auto makers’ awareness of the Korean auto maker as a serious rival, Pradzinski says: "Our district sales managers tell us that when Toyota and Honda were doing sales transactions, they'd never mention us, and now we are their focal point. They don't want to give up any share to us."

Toyota is offering incentives including special lease rates, but Pradzinski says Hyundai will do what it can to check competitors’ efforts to build sales momentum.

"We are trying to respond and (we) intend to, but we have to respond conservatively because our sales are capped at 734,000 units. How can you offer huge incentives on vehicles when you're going to sell all of them (that are) built anyway? We don't want to move backwards."