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Hyundai seeks to plug big-SUV gap

2015-06-08 10:24

MORE HYUNDAI SUVS? Hyundai will launch its third-generation ix35 in 2015 but the automaker is seeking to build bigger SUV models. Image: Automedia

SEOUL, South Korea - Hyundai Motor, whose sedan-heavy line-up has held it back in a US market powered by sport utility vehicles, is considering developing larger SUV's based on its Genesis luxury sedan.

That's according to four people familiar with the matter told Reuters.

However, it could take two or three years for the vehicles to reach showrooms. The South Korean automaker's perceived poor record with bigger SUV's and lack of bakkies is said to underscore the challenges in cracking the high-margin market for utility vehicles dominated by US and Japanese rivals.


There is no certainty Hyundai will bring the new vehicles to market, one of the sources said, given concern about its lack of brand power in the higher-priced SUV segment and whether oil prices could surge again and erode the market for fuel-guzzlers.

"We are timid when it comes to bigger SUVs," said the person familiar with Hyundai's vehicle development who did not want to be named as he is not authorised to speak to the news media.

A second person claiming knowledge of the matter said Hyundai was considering a 2014 internal proposal to develop a Genesis-based SUV to fill a gap at the high end of its SUV range. The intent was to plug-in to the appeal of the Genesis to elevate Hyundai's overall brand image.


US Genesis sales jumped by more than a third January-May 2015 to nearly 15 000, far outpacing Hyundai's overall sales gains of only two percent.

At the end of July 2015 Hyundai will halt production of its biggest SUV, the Veracruz, according to a newspaper published by its South Korean labour union. In 2014 Hyundai sold fewer than 5000 of its Veracruz, all of them in South Korea. In 2007 global sales were 54 325.

Hyundai confirmed the discontinuation of the Veracruz but said in an e-mailed response to Reuters' inquiries: "This does not mean we are giving up on a large SUV. We are considering developing premium, large SUV's based on customers' needs.

"We plan to respond to the fast-changing market centred on SUVs by beefing up our SUV line-up."


Once an outperformer in the US, Hyundai's May sales there fell 10% from a year earlier, the sharpest drop in nearly five years and lagging the market's 2% gain.

Hyundai shares are down 18% in 2015, the worst performing among major global automakers, also hit by a weak yen that benefits Japanese rivals.

Sales of SUVs and trucks are booming in the United States and South Korea, Hyundai's second and third-biggest markets after China, but Hyundai offers only two SUVs in the US - the compact Tucson and the mid-sized Santa Fe, and no pickups. In contrast, Toyota Motor's American line-up features eight SUVs and two pickups.

Manager, loyalty and industry analysis at research firm IHS Automotive, Tom Libby, said: "Overall, Hyundai needs to have competitive entries in the midsize, compact and sub-compact CUV/SUV segments.

Of all new Hyundai vehicles registered in the United States last year, 21.4% were CUVs (crossover utility vehicles) or SUVs, compared with 33.9% for the industry, according to IHS Automotive.


Hyundai's caution over making big SUVs with three rows of seats is born of experience.

In 2007, it brought the Veracruz to the United States, positioning it as a luxury model, but stopped selling it there in 2013 as sales dwindled. In 2011, sister company Kia Motors pulled its largest SUV, the Borrego or Mohave, from the US market just three years after launch.

"Oil prices are cheap now, but nobody knows how that's going to change. Mohave was a good vehicle, but its sales fell as fuel prices rose," the unnamed source said.

Even where it has had SUV success with its Tucson compact, Hyundai is constrained by tight capacity, and a second South Korean production line to supply markets including the US won't be online until September.

A planned US factory to make SUVs will enter production only in 2017, a source told Reuters previously.

Hyundai has said it is considering developing its first pickup, based on its Santa Cruz mid-sized concept, to give it some play in the United States where pickups account for 14 percent of vehicle sales, according to IHS data.

Read more on:    kia  |  hyundai  |  south korea  |  seoul  |  suvs

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