Hyundai capacity limits mean slowest U.S. growth in five years

By Alan Ohnsman
Bloomberg News

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Hyundai Motor Corp. vehicles are displayed during the 2013 North American International Auto Show (NAIAS) in Detroit, Michigan, Jan. 15. (David Paul Morris/Bloomberg)

Hyundai Motor Co., after boosting U.S. sales of its cars and trucks 75 percent since 2008, expects its slowest annual growth in the market in five years as the South Korean company bumps up against limits in plant capacity.

Deliveries of Hyundai vehicles should rise 4.4 percent to 734,000 this year, said John Krafcik, chief executive officer of the Seoul-based automaker’s U.S. sales unit. The increase of about 31,000 units from 2012 will result from improved efficiency at Hyundai’s Montgomery, Ala., factory, he said.

“All of our Korean plants are very tight, as are our plant in Alabama” and a Kia Motors Corp. factory in Georgia that builds the Santa Fe sport utility vehicle for Hyundai, Krafcik said.

“There are no plans to expand capacity. We have shown the last few years that without a new plant we’ve been very capable of finding incremental production.”

The growth spurt for Hyundai, South Korea’s largest carmaker, began in 2009 with redesigns of the Sonata sedan, Elantra compact car and Tucson crossover and culminates with the Santa Fe SUV. Supplies of the latter, offered this year for the first time in two varieties — a smaller Sport version and larger three-row model — also will be tight, Krafcik said.

Hyundai’s U.S. sales rose to 703,007 vehicles last year from 401,742 in 2008, the last year in which the company had a sales decline.

Restrained growth will allow Hyundai to keep improving vehicle quality and customer satisfaction, he said. “Volume gains are really not the focus right now.”

Industrywide sales rose 8.4 percent this year through February, compared with a 2.3 percent gain for Hyundai. AutoNation Inc., the largest U.S. retailer of new cars and trucks, expects U.S. sales to rise to the mid-15 million-unit range in 2013, up from 14.5 million last year.

“If they are dropping market share this year in the U.S. because of the capacity situation, that has to be very frustrating,” said Larry Dominique, president of Santa Barbara, Calif.-based ALG Inc., the industry researcher that determines vehicle residual values.

“Losing market share means someone else is getting the sales,” said Dominique, former head of North American product planning for Nissan Motor Co. “It’s curious, between Hyundai and Kia, that they are being so very cautious on capacity.”

Chung Mong Koo, chairman of both carmakers, said in January that their combined sales would rise 4.1 percent to 7.41 million vehicles.

Kia is building the Santa Fe Sport version at its West Point, Ga., plant, while the three-row model is imported from South Korea. Both the Kia plant and Hyundai’s Alabama factory run three daily assembly shifts to maximize production.

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