Hyundai looks to stay atop the crossover wave
HYUNDAI'S BRIAN SMITH: Riding the crossover wave
LOS ANGELES — Hyundai has been rolling out the crossovers: a new Kona selling like hotcakes and the plus-sized Palisade coming this summer, followed by the diminutive Venue by the end of the year.
And the rising tide of crossovers has been lifting all boats, says Brian Smith, COO at Hyundai Motor America. Sales are up this year in a down U.S. market, dealers are finally getting what they have been clamoring for, and the upward trend is likely to continue as the product rollout continues.
There are also fresh cars: a redesigned Veloster with a track-ready N performance edition that's been an instant hit, and a shapely new-generation Sonata that will get a sporty (but less fire-breathing) N-Line variant of its own, as will the Elantra. The Genesis brand is getting its dealer body up and running as it generates fresh product after a slow and complicated start.
Smith, 60, spoke with Staff Reporter Laurence Iliff at the brand's Southern California headquarters.
Q: Hyundai is riding a crossover wave with the Kona, and the upcoming Palisade and Venue. With those new products, can Hyundai maintain or grow sales as industry sales fall?
A: We went from having really two [crossovers] as a brand three years ago. And now we're going to have seven by the end of this year when we get everything in play — if you count Nexo, our fuel cell crossover, and then Venue, Palisade in addition to our current vehicles. It's incredible what our product lineup changes have done. And that's driving the volume growth for us. The frustration is, there's a significant enough decline in the overall passenger car industry that it somewhat offsets what would be amazing growth numbers. So at the end of the day, there's very few manufacturers that can say they're actually selling more vehicles this year than last year. We're one. So the answer is yes.
Our CUVs are not just growing in volume, but they're growing in terms of the mix, the portion of our total sales. You hear that the industry is 70/30 [majority] trucks right now, but that's including pickup trucks. If you remove that — where we don't offer any pickups — and you just look at CUVs and sedans, the industry is really much closer to 55/45 [majority CUVs]. Some months it's 60/40, but 55/45 is kind of where it lands. And we are going from being only 40 percent or so trucks last year versus 50/50 today. And the month of May we were 55 percent CUV. And we haven't even brought Palisade and Venue on yet. So I feel really positive about where we're heading.
What's your estimate for sales volume this year for Hyundai and the industry?
The timing of when we get the new vehicles to market obviously skews that final number dramatically, and we've been targeting all along about 5 percent growth, and in an industry that's expected to be down again. The last few years there have been a lot of forecasts of significant declines in the industry and it hasn't really happened yet, but this year feels like it's probably going to end up with a slight contraction. So any kind of growth in that type of economic environment is going to be really positive. So you know we'll feel real good if we end up at around 4 or 5 percent growth in this industry.
When you have new and exciting product, is it easier to get away from fleet sales and incentives? Is that a long-term goal? A medium-term goal?
Yes and no. Our fleet business is an important part of our overall business. We're at 20 percent, and that's kind of our target. It's probably going to continue to come down. But the rental car companies are heavily involved in CUVs right now. They haven't been left out of this dramatic shift in the industry. People coming in to rent vehicles want to rent small SUVs and midsize SUVs. So, we've been servicing and keeping our relationships with what are very important customers.
We just aren't growing that. In fact, we're bringing it down and we'll continue to bring it down a little bit just so that we can supply enough vehicles on the retail side. That's what's really driving it, is the demand for Kona. The rental companies love Kona and we can't get enough for dealers today. But I think it'll end up in the 15 to 18 percent range, and that's OK.
How about the sedan segment? Hyundai has a new-generation Sonata. How do you feel about the car business?
The Veloster N [performance edition] has shocked, really, the world, because they were three or four times their sales plan in Europe with the performance of Veloster N, and we're obviously doing very well with it here. It's almost 30 percent of our overall Veloster business, and it was never expected to be that strong. The new Sonata will end up having N Line. N Line has already been announced on Elantra. So, it's a way of taking those people who do like sedans and making it even more sporty. N Line is style, it's tuning.
Tell us about the status of the Santa Cruz pickup/crossover. Is it becoming closer to reality?
It's really moving forward. But I will change one word on you and not call it a pickup. So it's definitely small. It's definitely a core utility vehicle.
Santa Cruz, the vehicle that's moving into production at some point, is going to look really similar to that concept vehicle.
That's been the fun part to watch in this design evolution is how close they've been able to stick to that concept vehicle from four and a half years ago.
Does having new products better aligned with the marketplace help you with dealers?
Yes. Hyundai has a great dealer body. Many of them have been dealers since the brand launched in 1986. I continue to see dealers, and they still tell me, "I've been with the brand since day one, and this is the best I've felt about the brand ever." Others will tell me, "This is the best I've obviously ever felt about the product line" — it's the closest we've ever been aligned with what industry demand is. So those are all good signs.
All dealers right now are reeling with some of the changes going on in retailing, and we have a lot of initiatives underway to work with the dealers on how can we be the best partner, just to move toward digital retailing, for example. You know there's a lot of products out there that are targeting helping dealers do more business online so that when customers do show up at the dealership, they're prepped to make it a quick, simple process both for the dealer and the customer.
On the Genesis side, where's the brand in terms of the dealer network? Is that what's been holding back sales?
The products are terrific with Genesis — G70 winning the North American Car of the Year and Motor Trend vehicle of the year. That was a huge surprise to a lot of people that any brand-new vehicle like that could make such an impact. Right now, the Genesis brand is growing within the Hyundai franchise. There's been licensing challenges, and so that's put us behind the eight ball in terms of the volume numbers that you saw last year. But we've worked through that. And we have about 330 dealers today who have raised their hand to be a Genesis dealer. And so, Genesis sales as a brand are just now beginning to ramp up. The numbers in May were really strong.
There's no shortage of Genesis cars?
It's a car shortage from a consumer perspective, right? They'll be calling around to see where's the nearest Genesis dealer that I can come take delivery. In California, we've got quite a few of the dealers that have signed their papers. But in terms of being done and ready to sell cars, it's still few and far between. So here in L.A., you would have to be online and talk to dealers about inventory. So yes, we have the cars available, but getting them in as many locations as we'd like is taking time.
Hyundai has a range of green vehicles, but availability — battery shortages — has been a problem. Is that improving?
Supply problems are always a challenge for all manufacturers. But Hyundai is investing in it. Hyundai has announced plans to help improve that availability soon. So we're keeping our fingers crossed. With fuel cell, our goal as a company — and I think is the right one — has been to continue to invest in developing a number of these different technologies. As infrastructure comes up both for electric, but primarily for fuel cell, consumers are going to decide what the right technology is going forward. Nexo is terrific. It's only on sale here right now, because really California is first at investing in the infrastructure. But even then, you have to really be around L.A., San Francisco, Sacramento to find fuel cell stations.
But the vehicle itself, it's a true crossover. It has wonderful styling, it's terrific on the inside. We have a waiting list. There are dealers that are being trained and certified a few at a time, and they each have a long list of customers waiting for Nexo to come in. We get about 20 to 30 a month, and they're all spoken for and they're delivered and customers love the experience. So it's been fun.
So, you have the support to build all the eco-vehicles you need eventually?
I don't want to be the one to say every single vehicle is going to have three different versions, but our future product lineup is continuing to grow. So there'll be more availability of hybrids and plug-ins. To me, plug-in is a great technology, because the only reason some people would say electric doesn't work is because of driving distances. They have this range anxiety — what happens if my battery runs out. With a plug-in you've got that backup. They're really full electric vehicles that have the backup of a gasoline engine if you ran out of battery.
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