Hyundai gear up to tap growing SUV segment

January 11
3:20 AM 2016

The South Korean automobile major Hyundai Motor Co has decided to explore the growing sports utility vehicle (SUV) segment. Towards this, Hyundai will make Santa Fe Sport to increase the supply for the SUV segment in the US market. Hyundai is struggling with sluggish sales of Sedan vehicles.

Hyundai has decided to increase production of Santa Fe Sport vehicles at Montgomery, Alabama, factory this summer. Hyundai's Sedan cars such as Sonata are not moving much in the US market. The lower gasoline prices are driving sales of SUVs and trucks upwards in the US market. 

Reuters reports that Santa Fe Sport will be one of the three models made at the Montgomery plant. The other two models are Sonata and Elantra. Santa Fe Sport is a five-passenger crossover. The two-row Santa Fe Sport manufacturing facility will supplement production of the model at a factory in Georgia State. 

Hyundai's sister concern Kia Motors Corp operates the plant in Georgia State and the manufacturing plant makes Kia's Sorento SUVs and Optima Sedans. Hyundai is planning produce 30,000 Santa Fe Sport vehicles in Alabama unit from June to December in 2016.  David Zuchowski, President of Hyundai North America, said: "The new production will help us meet the growing demand for one of our most popular products."

Cho Soo-hong, an analyst at NH Investment & Securities, said: "The Santa Fe Sport is likely to replace some Sonata production as sedan demand is not strong." It's estimated that the Kia factory is likely to produce SUVs to the tune of 105,000 this year as against 114,000 in 2015.

Hyundai Motor has manufacturing plants in Brazil, China, The Czech Republic, India, Russia, Turkey and the US. According to Hyundai Motor, global sales rose 8.5 percent to 516,359 vehicles in December 2015. Hyundai's overseas sales were up 6.8 percent on year-on-year basis.  Hyundai forecasts 5,010,000 sales target including 693,000 units in domestic market and 4,317,000 units in overseas markets.

The production targets for Sonata, Elantra and Santa Fe Sport will be decided in next few months. Alabama plant's capacity is likely to remain at 400,000 vehicles per annum. The crossover vehicles are beating the sales of Sedans in the US market.

The high profile crossover vehicles are attracting consumers as they accommodate more people with car-like driving comfort. Crossovers are based on car chassis, while regular SUVs are based on truck chassis. 

Considering the growing demand for SUVs, Hyundai India is set to roll out new subcompact SUV in February 2016, as reported by CarAndBike, an NDTV venture. Consumers are moving from Hatchbacks to Sedans to SUVs now. Hyundai will make available SUVs ranging from INR 9 lakh ($13,850) to INR30lakh ($46,200) in Indian market by end of 2016.

Santa Fe Sport vehicle is a small crossover and it seats five passengers. This is the fastest growing segment in the US market. The larger Santa Fe crossover comes with three rows and seats six or seven passengers. This South Korea plan will continue to produce these model vehicles. 

The limited production capacity put pressure on Santa Fe Sport vehicle sales volume. Santa Fe Sport sales were up six percent to 86,433. The larger crossover Santa Fe sales rose 19 percent to 31,701.

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