Hyundai to expand U.S. plant capacity to build more SUVs, reports say

DETROIT/SEOUL (Reuters) -- Hyundai Motor Co. plans to expand its U.S. factory, three people familiar with the matter said, hoping to ramp up production of SUVs as lower oil prices boost demand for trucks.

Sales of the South Korean automaker's sedans such as the Elantra and Sonata are slowing in the U.S. as consumers take advantage of lower fuel prices to switch to bigger, less fuel-efficient SUVs and crossovers.

"It's a new assembly line right next to the current Alabama line. State of Alabama is negotiating final terms," one of the sources said, referring to the company's planned new production facility.

A Hyundai spokesman said there were "no plans at this stage" to increase capacity in the United States.

Hyundai currently builds its Santa Fe at affiliate Kia Motors' production facilities in Georgia, while importing Tucson compact SUVs from Korea.

Hyundai's factory in Alabama builds its Elantra compact and Sonata midsize sedans.

Two other sources said Hyundai had been considering building a new U.S. assembly line to cope with SUV demand, but they had not heard about a final decision. The sources would not be identified because the matter was confidential.

"Hyundai needs to build a second plant in the U.S," Korea Investment & Securities auto analyst Suh Sung-moon said.

He said Hyundai might transfer Santa Fe production to Alabama, which could also produce the Tucson and a pickup. Hyundai currently does not sell a pickup in the U.S.

The Yonhap News Agency reported the new plant in Alabama would have annual capacity of 300,000 vehicles and start SUV production in 2017.

U.S. sales of Hyundai, a strong performer during the 2009 global economic downturn, rose 4.3 percent from January to February, lagging the market's 9.2 percent growth.

Hyundai will launch a revamped version of its Tucson SUV in Korea this month, followed by the United States and other countries.

Kia plans to start production at its first Mexico plant in the first half of next year, to help ease capacity constraints at its U.S. factory.