CEO John Krafcik says that plant capacity will limit Hyundai’s sales in U.S.

Article by Christian Andrei, on February 9, 2012

Hyundai Motor America had succeeded in doubling the industry's 10 percent sales increase in 2011 but there won’t be similar gains this year, according to John Krafcik, CEO of Hyundai Motor America. Due to capacity limits at its Alabama plant, Hyundai would be considered lucky if it can match the industry's anticipated 8 percent gain to 13.8 million units.

If it does achieve this target, it will place Hyundai brand sales slightly lower than 700,000 units. Last year, Hyundai was able to relieve bottlenecks at the plant to boost the capacity at Alabama from around 300,000 to 330,000 units. It’s not likely that this facility will be able to increase this volume further.

At the J.D. Power International Automotive Roundtable, Krafcik said that the Korean production of the Azera and Veloster will both be full-year amounts, without compromising the output of other models. Krafcik said that due to the limited supply, Hyundai's fleet penetration will decrease so Hyundai can guarantee the steady retail deliveries to dealers.

He said that in 2011, Hyundai's fleet sales fell below 10 percent but it could go as low as 7 percent this year. He added, "We are going to serve our dealers and turn fleets way down." He also said that the company aims to sell each car that’s built. He cautioned that other automakers have seen its problems with capacity and have already started to return to the fleet market. He said that the industry’s strong results last January were deceptive.

He said that just 50,000 additional vehicles were sold retail industrywide, with "some really big fleet mixes" from Detroit that’s responsible for the overall gain. Due to the limited availability, Hyundai's incentive spending is expected to remain at or below $1,000 for each vehicle, which Krafcik claims to be the lowest of any brand in the industry.

Krafcik is relying on dealers to provide "an emotional connection" with customers, especially with the launch of franchise's facility renovation programs. Of the 815 total Hyundai dealerships, around 345 (making up 70 percent of Hyundai sales) have undergone renovation, costing an average of $900,000. Krafcik added that what the company is aiming for is to “deliver a consistent brand experience for 20 percent of the cost." [source: Autonews]

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