U.S. Capacity Constraints Stall Hyundai; Third Premium Car in Works

DETROIT – Hyundai’s manufacturing capacity restraints last year broke the auto maker’s 14-year streak of U.S. market-share gains, says Hyundai Motor America President and CEO John Krafcik, who hints at a third premium entry for the region.

“We were capacity-constrained,” Krafcik tells WardsAuto after revealing the HCD-14 premium concept car at the North American International Auto Show here. “Almost all year, we were the leanest company from a days’ supply standpoint.”

The inability to meet demand for its cars and cross/utility vehicles lowered the Korean auto maker’s anticipated share of the U.S. market to 4.9% in 2012 from 5.1% in 2011, according to WardsAuto data. Hyundai had posted U.S. share gains every year since 1998.

Hyundai’s light-vehicle sales last year climbed 8.9% to 703,007 units, from 645,691 in 2011. Passing the 700,000-unit threshold marked a key goal for its operations in 2012, and it posted a retail-share gain. But the industry grew at a more brisk clip of 13.4%.

“We couldn’t keep up with the industry,” Krafcik adds. “The industry grew faster than we did, by a little bit. We’ll see how that goes in 2013. The industry is growing gangbusters. It feels really strong.”

While arguably a good problem for a young brand to have, capacity constraints have put the reins on Hyundai’s growth.

The auto maker added a third shift to its Montgomery, AL, assembly plant at the end of the third quarter last year, giving it about 20,000 more units of production. Krafcik estimates the shift will translate into about 60,000 more units out of this year.

“We’ll have a little better availability of (the) Sonata and Elantra in 2013,” he says, cautioning, “There is more demand for Hyundai products than we’ll be able to satisfy.”

But share gains will take a back seat to customer satisfaction at this point in HMA’s life.

While Hyundai has built a positive reputation among premium customers with the purchase process and ownership experience of its Genesis and Equus models, the executive says dealers must take the same approach with volume-sellers such as the Sonata and Elantra sedans and Santa Fe CUV.

Product quality also must continue to improve, Krafcik says. “I want to spread (the ownership experience) across the entire lineup. If we can do better from a quality standpoint at our dealerships and continue to deliver the quality we need in our products, that might be a signal to the market we’re ready to build more.”

That’s one reason Hyundai intends to keep its premium products in the same showroom as its volume models, instead of establishing a stand-alone store as Toyota and Nissan have done with Lexus and Infiniti, respectively. Why isolate a premium experience to premium cars, Krafcik asks.

It appears the premium space at Hyundai dealerships will grow, too. While the HCD-14 premium concept car unveiled here hints at the next Genesis, which HMA will reveal at the Detroit show next year, Krafcik says the exercise also demonstrates what a third luxury model from the auto maker could look like.

“There is another car coming after the next Genesis sedan that has a big dose of HCD-14,” he says.

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