Tucson's Success Putting Hurt on Santa Fe

ANN ARBOR, MI — Hyundai Motor America expected the Tucson to be successful, but the small cross/utility vehicle has performed beyond the auto maker's ambitious expectations.

So much better in fact that it is beginning to take sales away from the larger Santa Fe SUV.

“Tucson's doing better than we expected. And I think some of that better-than-expected-ness has come out of Santa Fe,” John Krafcik, vice president-strategic planning and product development-HMA, tells Ward's here at an introduction of the new Sonata.

Krafcik says the Tucson's similar size is the reason for the 28.7% drop in Santa Fe sales calendar-year-to-date.

For instance, when comparing front and rear cabin room, there is virtually no difference between Tucson and Santa Fe, with the cargo area being “the only differentiator,” says Krafcik.

“So a customer comes into a showroom, sees a Tucson, it's got all the safety gear that they're hearing more and more about, and it's priced less,” he says. “Then they're thinking, ‘I'll take that one, it looks pretty good.’”

Through July, Hyundai has sold 34,853 Tucsons in the U.S. The original sales goal for the CUV was 40,000 units annually, but after it launched the target was raised to 60,000.

Now, “it looks like it has a shot at a 70,000-unit year,” Krafcik says.

He is especially proud of the fact incentives have remained low on Tucson, at about $1,000 per vehicle vs. the segment average of $2,000.

“It's selling with a very light incentive load because we priced it well,” says Krafcik of the Tucson's $17,499 base price.

The next-generation Santa Fe is due next spring and Hyundai has promised a bigger, more luxurious vehicle, with sales targeted at 150,000 units annually. Last year, Santa Fe deliveries totaled 111,447 units, up 10% from 2003.