HYUNDAI'S JOSE MUÑOZ: Hybrids will help with transition to electric

In his first year at the helm of Hyundai Motor North America, Jose Muñoz oversaw a 4.7 percent U.S. sales increase for the Hyundai and Genesis brands in 2019, and he began building his executive team and sales strategy with the goal of reaching 1 million sales in the U.S. by 2025.

In 2020, Muñoz rolled out dealer facility programs at the two brands amid some retailer pushback and steered the Korean automaker through the pandemic. Hyundai brand retail sales rose 1 percent even as weakness in fleet sales led to a 10 percent decline in total volume and Genesis struggled with inventory.

For his third act this year, Muñoz and Hyundai are pushing hard on electrification, rolling out hybrid and plug-in hybrid versions of the Elantra sedan and Tucson crossover, in addition to launching an electric vehicle subbrand and delivering the automaker's first dedicated EV to showrooms, the Ioniq 5.

Muñoz continues to work with dealers to improve brand image at Hyundai and Genesis as they go head-to-head with more established Japanese rivals. He's also reiterating his sales goal for 2025, including a significant number of EVs, as Hyundai and Genesis introduce at least four battery-powered models to U.S. showrooms.

Muñoz, 55, spoke last month with Staff Reporter Laurence Iliff. Here are edited excerpts.

Q: Hyundai continues to add hybrid and plug-in hybrid vehicles in addition to the brand's first dedicated EV, the Ioniq 5. Are the new hybrid vehicles intended as a transition to an electric and hydrogen future?

A: The Ioniq 5 is the first Ioniq vehicle as a subbrand of Hyundai. But not only do we have Ioniqs — the 5 and the 6 and the 7 — but we are also introducing 12 battery-EV models [globally]. The Hyundai Motor Group wants to sell about 1 million EVs [annually] by 2025 and the Hyundai Motor Co. itself about 560,000. The total represents somewhere around 8 percent to 10 percent of the global EV share. Just so far this year, we have more than doubled our green-car sales including battery-EV, hybrid, plug-in hybrid and hydrogen. And as a share of our own sales, it has tripled, which is what we wanted. We think that the introductions of the Tucson plug-in hybrid, the Tucson hybrid, the Santa Fe hybrid and plug-in, the Elantra hybrid are really going to help us transition to a full battery-EV future.

Hyundai has caught up in terms of quality to its main Japanese rivals and picked up some market share. Are EVs an opportunity for Hyundai to make even bigger gains?

With the arrival of the E-GMP electric platform, this is really a breakthrough. The traditional platforms limit what you can do or cannot do in a certain model. But with a new platform, it's been designed from the very beginning to be a breakthrough in terms of innovative design, interior space, and technology. This is aligned with the announcement that our chairman (Euisun Chung of Hyundai Motor Group) has made numerous times about the investment in Strategy 2025. It's about a $55 billion investment in group technology, most of it but not all of it on vehicle technology.

You've discussed the need to increase North America capacity to meet Hyundai's sales goals. At Hyundai's existing U.S. factory, do you have that space to grow?

At the plot of land where we have our plant in Montgomery, Ala., we have plenty of space. There is a lot of room for us to grow, capitalizing on SUVs as step one. And that's basically what we're doing with the investment we just made to launch the Tucson and the Santa Cruz. The total capacity has not been increased, so it's 400,000 a year roughly. The more SUVs we produce there, the more passenger cars that we'll have to get from other sources. So, we can continue to do that for a while. There is room there, but we have not made a specific announcement yet.

The Palisade has been in high demand since it was launched in 2019. Is that a model you'd like to make in the U.S. rather than importing it from Korea?

If it was just what I wanted to do, I would manufacture all the SUVs in the U.S. and all the EVs. But there are many factors to consider. It all starts with having a good design, good features. We keep getting more and more Palisades, and there are never enough, which is a happy problem. We are asking our headquarters to increase production for us. But for the time being, one of the things I managed to do was to localize the No. 1 product for us as a group in the world, which is the Tucson. So, I'm going step by step. The Tucson is the first step, and then we have the Santa Cruz, which we've positioned as a sports adventure product. That's a great addition to the Tucson [at the Alabama factory]. If we do this well, I think Hyundai is going to be a very strong contender in this market and is going to be competing more head-to-head versus our main Japanese competitors.

Two years into your leadership at Hyundai and more than a year after the start of the pandemic, how would you assess Hyundai's performance in this tough period?

I think arguably we had a solid performance across the board, but I always see more opportunities. From a business point of view, we had an outstanding 2020. We had the best retail market share gain in the industry. And then we also achieved an all-time record in the first quarter of 2021 in retail sales with more than 157,000, which was a remarkable increase of 38 percent in retail sales and 28 percent of total sales. Not to mention Genesis with more than a 140 percent increase.

What are some of the high points of the last year or two?

One of the areas that makes me feel very proud is the activities that we did as corporate social responsibility during the pandemic. When we saw this coming, we took the decision to help a South Korean company, Seegene, to get their FDA urgent authorization to do PCR tests across the board. We utilized our contacts with the hospitals that we've supported for many years through Hyundai Hope on Wheels and we made 23 drive-through test centers, also with a donation of $4.4 million. Today, we have enabled about 2 million tests.

What are some of the challenges going forward?

We have challenges across the board. Let me give you an anecdote. We used to have a monthly car-flow meeting to analyze the situation of the supply. From monthly, we went to a weekly car-flow meeting and now we have an almost daily car-flow meeting. In normal times, these things are super stable, and you know almost what you're going to get the next 18 months at least, if not longer. Now you're happy if you know what you're going to get the next week. That shows how agile you need to be if you're going to maximize the throughput in an environment where you don't know what you are going to get in terms of microchips, semiconductors, etc.

There are stories of vehicle models, such as pickups, being in very short supply at dealers. Has Hyundai reached a crisis level on any models?

We have reduced our dealer inventory, and if you talk to our dealers, they will gently complain. But they will also say we are in better shape than our competitors. We've done a better job generally on SUVs lately because they're new and they're great, so the dealers have a little less inventory on SUVs than passenger cars. That's also an opportunity because some of the consumers coming to the market were people using ride-sharing and now they want their own cars, and we have them. We don't have any model that has kind of completely dried up.

Hyundai is creating a new EV subbrand, Ioniq. How will it work at the dealership level? Will there be dedicated EV showroom space or will the vehicles just be mixed in?

We have determined some key elements for a Hyundai dealer to be an Ioniq dealer. Some are very basic, like there is a dealer participation agreement, we include sales and service training, the dealer must have on-site charging equipment and some dedicated display areas and signage. We've got way more [dealer] applications for Ioniq than what we had originally planned. That means the standards and the requirements are reasonable. Dealers see the future of electrification.

Do dealers worry about reduced service revenue from EVs? Is there a way to make sure that they don't lose a bunch of money selling EVs?

As you can imagine, there is a lot of conversation about what the service situation is going to be like once all the vehicles are electric. In principle, the rule of thumb is that an electric vehicle is going to require about one-third the service needs of an ICE vehicle. At the same time, the needs are high tech, and current service needs like tires and potential body work will remain. But the most important thing is that we are growing as a brand. Even if there is a reduction in the revenue opportunity per unit, everybody understands that it's not going to disappear completely.

What are some key initiatives going forward?

One of our key focuses is to strengthen the brand. With our advertising, we are positioning the brand as more aspirational. We are displaying our technology, we are enhancing our trim mix, our model mix. Consumers are realizing we have very good technology — in some cases much better than our competitors — and are buying our cars. We are having significant conquest. We are not only trying to sell what we have, but at the same time trying to transform the network, transform the brand so that today and tomorrow after this pandemic, we will come out stronger, ready to better compete head-to-head with our main Japanese competitors.