Lack of mini CUV latest headache for Hyundai

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Lack of mini CUV latest headache for Hyundai

Hyundai Motor, already struggling with a host of business challenges, is developing another headache: a dearth of products to compete in a fledgling U.S. mini-crossover utility vehicle market even as rivals gear up for a big push. This adds to Hyundai’s challenge in making significant market share gains in the United States, where it has a smaller presence in the SUV segment than its rivals.

A Hyundai executive said this week at the Detroit auto show that the company’s share of the U.S. market, its second biggest, will likely improve to 4.7 percent this year from 4.6 percent in 2013.

Excitement over the promise of a market for subcompact crossover utility vehicles (CUVs) is mounting in the United States. General Motors said it expects sales of its Buick Encore subcompact CUV and mini SUV-like vehicles by other automakers, including those offered by luxury brands, to reach 400,000 a year in 2018.

Roger McCormack, U.S. marketing director for the Buick brand, believes demand from downsizing empty nesters and urban youth is going to drive sales of mini CUVs.

“I am really excited about the potential,” McCormack said this week. “The idea is .?.?. I can get that functionality [of crossovers], but I don’t need to do it in a bigger vehicle necessarily. Now, I think it fits a lot of people’s lifestyles very nicely.”

Yet, according to four individuals close to the company, Hyundai won’t likely have an answer for that expected growth in the foreseeable future.

“It looks more and more like Hyundai is going to completely miss the boat with mini crossovers at least for now,” said a person privy to Hyundai’s global product plans who asked not to be identified.

Dave Zuchowski, recently appointed U.S. chief executive of Hyundai, said the automaker plans to boost its crossover and SUV business as part of a mid-term effort to reach a market share of 5 percent.

But Hyundai has no immediate plans, he noted, to come up with a model to compete in the subcompact CUV market. Instead, it plans to focus its sales and marketing efforts on bigger CUVs that it already markets, namely the Tucson compact and the Santa Fe midsize SUVs.

Hyundai is “definitely looking at” the subcompact crossover market, Zuchowski said. “There are a lot of activities going on there right now. We have no immediate plans, nothing approved in the product cycle. But it is the segment that interests us.”

Hyundai’s mini-crossover challenge compounds a host of issues it’s already confronted with in the United States, including heightening competition from Japanese automakers now armed with the cheaper yen, as well as a lack of manufacturing capacity that the company’s U.S. sales team has cited in recent months as an obstacle to growing sales.

Hyundai also has been faced with the relative lack of penetration in the overall U.S. crossover and SUV market. According to industry research company Edmunds.com, only 18 percent of the Hyundai brand’s overall U.S. volume came from crossover and SUV sales as of November. That compares to Chevrolet’s 27 percent and Honda’s 33 percent.

Reuters

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