Hyundai can’t keep up with demand

Hyundai’s American and South Korean plants are running flat out, but that’s not enough to keep up with demand, Hyundai Motor America CEO John Krafcik told dealers at a J.D. Power and Associates conference in Las Vegas Friday.

The math is clear: Hyundai made about 420,000 vehicles in the U.S. last year — 330,000 at its plant in Montgomery, Ala., another 90,000 from its sister Kia’s plant in West Point, Ga.

But Hyundai sold about 640,000 vehicles in the U.S. The gap was filled with cars imported from South Korea.

Last year, Hyundai was able to squeeze an extra 30,000 vehicles from the Alabama factory by easing bottlenecks in the paint shop. The automaker will look for similar ways to boost production in Georgia, too, but Krafcik said he doesn’t expect a 10% boost again.

Krafcik said his Korean bosses want to limit capacity because they don’t want to grow too fast. “We are worried at a time of great growth to make a mistake on the quality side,” he said.

He cited Toyota‘s recall of more than 2 million cars from late 2009 through 2010 as a cautionary tale that exposed the risk of expanding too rapidly. Despite the capacity constraints, Hyundai expects sales will continue growing in the U.S. this year, led by new models such as the Azera and new Veloster.

John Humphrey, general manager of the global automotive division of J.D. Power and Associates, said North American light-vehicle sales should grow 8% this year to 16.4 million — 13.8 million of those to come in the U.S.

Humphrey said the industry as a whole is doing better at matching production to demand. That has helped automakers to reduce incentives and fleet sales, and thus achieve higher average transaction prices and profits.

Krafcik said only 18% of cars sold in the U.S. last year had a rebate — down from 70% or higher before the Great Recession — and the average was $1,005. In January, that average fell to $859.

Hyundai expects to sell only 6% to 7% of its cars to fleet customers — rental companies, governments and corporations — compared with 10% last year.

Nearly half of Hyundai’s 815 U.S. dealers will have renovated their showrooms by the end of the year, spending, on average, $900,000 for new signage and more inviting waiting rooms. But Krafcik said, at least for now, Hyundai will not break out its upscale Genesis and Equus models into a separate luxury brand.


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