Hyundai U.S. Sales Chief Forecasts Flat Year

WASHINGTON – After several years of outpacing industry growth, Hyundai merely will keep up with increasing volume this year, says David L. Zuchowski, executive vice president-national sales.

In an interview at the capital auto show here, Zuchowski tells WardsAuto that Hyundai sales will grow a relatively modest 8% in 2012 because of severe supply constraints. Hyundai sold 645,000 vehicles in 2011. “Right now we don't have enough production to break the 700,000-unit barrier this year.”

The Korean auto maker doesn't want to push its plants to the point where quality could be compromised. “We don't want to have Toyota's quality problems,” the executive says.

Hyundai is intent on preventing growth from affecting its increasing reputation for reliable vehicles. “That's why we have global capacity issues,” Zuchowski says.

“It's frustrating to me as head of sales,” he admits. But he also sees this plateau as an opportunity to consolidate the auto maker’s reputation for dependability. Hyundai and its sister brand, Kia, rank at or near the top in owner loyalty, and this has allowed the brands to achieve a high level of conquest sales in recent years.

The recent tornado in southern Alabama did not affect production at the plant there, but the facility will shut down for 45 days later this year to retool for new Santa Fe output. Because of that, Hyundai will build only 75,000 units of the cross/utility vehicles this year, but that will almost double to 140,000 in 2013, Zuchowski says.

The ’13 model-year Santa Fe will make its public debut at the New York auto show in April. Zuchowski says the CUV is a core vehicle in the Hyundai portfolio, and the West Point, GA, plant the auto maker shares with Kia will begin assembling the model in midsummer.

Seven new Hyundai models will be launched in the next 11 months. Despite this, sales won't take off as one might expect with so many introductions, he says. Hyundai's global plants are maxed out and can't supply all the products the brand's 817 U.S. dealers could sell.

But Zuchowski is confident Hyundai will keep pace with industry-wide growth, which he forecasts will be about 8% to 13.8 million units in 2012.

Industry sales grew an overall 10% last year and retail deliveries increased 13%. But Hyundai’s overall sales rose 20% in 2011 and its retail deliveries jumped 29%. The auto maker won't duplicate that performance this year, he concedes.

Zuchowski predicts industry sales will climb to 15.4 million units in 2013 and soar to 16.2 million in 2014. “We feel good about where the industry is going,” he says, noting U.S. vehicles now on the road now average about 11 years in age. “The need to replace our aging fleet becomes more pressing.”

Hyundai dealers average 770 new-vehicle sales annually. That's just behind Toyota and Honda. “We can become a leading franchise, not a trailing franchise,” he says.

The midsize-car segment will be this year’s key battlefield, Zuchowski predicts. “We're watching new competitors, especially the domestics.” The new Chevrolet Malibu and Ford Fusion, along with the still comparatively new Toyota and Honda entries, will be particularly formidable competitors.

Zuchowski insists Hyundai will not use incentives to hold market share: “We've backed away from visible customer rebates. Maybe we'll have more subvention lease support.”

The new 2- and 5-door Elantra, which debut at the Chicago auto show next month, will go on sale in April and May, respectively. Both models are built in Korea. He expects the coupe will achieve mostly substitute sales, but 5-door deliveries will be incremental.

Zuchowski wants his dealers to concentrate on growing their pre-owned vehicle sales. “Our dealers have focused on new-vehicle sales,” he says. “We want to get our dealers more engaged in the pre-owned business.”

Hyundai dealers’ pre-owned sales average only 2.5% of their overall sales. Zuchowski would like the dealers to double that and match the industry average. He says that is possible because the auto maker’s brand perception has grown markedly among car shoppers.

“Now 40% of buyers say they would consider a Hyundai,” he says. “It was only 18% four years ago.”

Zuchowski predicts hybrids will be an increasing segment of Hyundai growth.

The auto maker recently stunned the industry by offering a lifetime warranty on the battery pack in its hybrids. What makes this possible is that most companies still use nickel-metal-hydride chemistry. Hyundai uses a lithium-polymer chemistry in its battery packs. That's what makes lifetime warranty costs “manageable” for Hyundai, Zuchowski says.

Hyundai also is continuing development of hydrogen fuel-cell vehicles and is testing a fleet of such cars in Korea and in the U.S.

The auto maker currently is building a $150 million North American headquarters in Fountain Valley, CA, due to open next year.