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Hyundai sales plunge in U.S., autos fill the lot

Strong won, Japanese competition to blame

Feb 26,2007
Sales of the NF Sonata, the flagship car from Hyundai Motor’s plant in Alabama, the United States, have been losing steam in recent months. According to Hyundai Motor, the number of unsold cars in inventory at the Alabama factory passed 100,000 last month amid forecasts that the figure will reach up to 120,000 in March.
Given that monthly production at the plant is 15,000 to 18,000 units on average, the appropriate inventory level is 40,000 at maximum. The production facility in the world’s largest auto market, which began production in May 2005, is capable of churning out up to 300,000 cars per year as the workers, divided into day and night teams, alternate on 10-hours shifts.
The auditing bureau at Hyundai Motor headquarters sent a team of investigators in the mid-February to look into whether the increase in inventory was due to inefficiencies at the Alabama plant or in the U.S. unit of the automaker.
“The rising number of unsold cars at Hyundai Motor America is an indication of something negative about the division’s competitiveness in the market,” said Ahn Soo-woong, an analyst with Woori Securities Co. “Giving attention to large-sized cars is important, but what matters more at this moment is refreshing tactics for raising sales of smaller models.”
Critics point out that Hyundai’s NF Sonata model was hit hard by Japanese carmakers’ aggressive marketing and efforts to increase quality. Though Toyota’s 2.4-liter Camry, released in April last year, is up to 20 percent more expensive than the Sonata and shares the same engine displacement, the Japanese car has sold a monthly average of 30,000 units lately, receiving upbeat reviews by American consumers and car experts. The model was praised for its larger interior space and better engine.
On top of that, Hyundai increased its vehicle prices by 10 percent in the latter half of last year to make up for sliding profitability from the strong won and halted fleet sales of the NF Sonata in September. Since then, monthly sales of the Sonata at the carmaker’s U.S. operation have plunged to below 10,000 units.
In an emergency measure to rescue plunging sales, Hyundai Motor America launched a leasing program whereby Sonata buyers pay $999 down and make monthly payment of $199 over 30 months to be allowed to drive 30,000 miles. That program also includes financing of rebates worth $2,300 and $800 in incentives, according to Hyundai.


By Kim Tae-jin JoongAng Ilbo [spring@joongang.co.kr]


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