Krafcik: Capacity crimps Hyundai
Photo credit: JOE WILSSENS
Hyundai Motor America, which doubled the industry's 10 percent sales gain in 2011, will not see similar gains this year, its top executive said.
Because of capacity constraints at its Alabama plant, Hyundai will be fortunate to match the industry's expected 8 percent gain to 13.8 million units, said John Krafcik, CEO of Hyundai Motor America. Achieving that would put Hyundai brand sales just shy of 700,000 units.
Hyundai was able to free bottlenecks at the plant last year to increase capacity at Alabama from about 300,000 to 330,000 units. The plant likely cannot increase that amount again. But Korean assembly of the Azera and Veloster will both be full-year amounts, without sacrificing production of other models, Krafcik said at the J.D. Power International Automotive Roundtable here Friday.
As a result of limited supply, Hyundai's fleet penetration will decline so Hyundai can ensure consistent retail deliveries to dealers, Krafcik said. Hyundai's fleet sales were below 10 percent in 2011 and could be as low as 7 percent this year.
"We are going to serve our dealers and turn fleets way down," Krafcik said. "We're going to sell every car we can make."
He warned that other manufacturers, seeing capacity to burn, are already getting back into the fleet market. The industry's strong January results were deceptive, Krafcik said. Only 50,000 more vehicles were sold retail industrywide, with "some really big fleet mixes" from Detroit responsible for the overall gain, he said.
With limited availability, Hyundai's incentive spending is expected to stay at or below $1,000 per vehicle, which Krafcik said is the lowest of any brand in the industry.
Krafcik is counting on dealers to deliver "an emotional connection" with customers, especially as the franchise's facility renovation programs kick in. About 345 of 815 Hyundai dealerships -- representing 70 percent of Hyundai sales -- have been renovated, which cost an average of $900,000.
"We are not specifying the type of grout to be used in our bathrooms," Krafcik said. "We want to deliver a consistent brand experience for 20 percent of the cost."
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