Hyundai to Boost SUV Capacity in U.S. & China After Q1 Results

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A report from AutoNews said that Hyundai could be thinking about to boost production of SUVs in the United States and China plantas after the latest results of the Q1 profits fell again, due to the cost of agressive marketing campaigns to sell more cars and weak yen.

Hyundai, which together with affiliate Kia Motors ranks fifth in global sales, said net profit eased 1 percent to 1.91 trillion won ($1.77 billion) in the January-March period from 1.93 trillion won a year earlier. The decline was its fifth quarterly profit drop in a row.

While rivals cash in on the SUV boom, spurred in part by cheaper fuel, Hyundai has grappled with a lack of production capacity and absence of new models in the segment.

The firm said it expects earnings to improve in the current quarter, fueled by overseas rollouts of the latest version of its Tucson SUV.

“We were not able to cope with the market demand because of SUV capacity constraints, which have impacted our earnings,” President Lee Won-hee said on a conference call.

Hyundai is “actively” considering boosting production capacity in the United States, as well as China, to keep up with market growth, Lee said.

Dave Zuchowski, CEO of Hyundai Motor America, said earlier this month “another Hyundai assembly plant in North America is among the options under review as the company nears a decision on where to add crossover production capacity around the globe”. He said no decision has been made.


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A Pickup truck?

Lee said the company is also “cautiously” considering entering the pickup Santa Cruz truck market, a segment dominated by U.S and Japanese rivals.

Hyundai and Kia raised their 2014 vehicle sales targets late last year even as demand for their mainstay sedans stalled. Hyundai was forced to boost sales promotion incentives by nearly 30 percent in the U.S. market, to an average $2,200 per vehicle, in order to clear inventory during the quarter.

At the same time, the South Korean won strengthened against currencies in Russia, Brazil and Europe, eroding overseas earnings. More than 85 percent of Hyundai’s vehicle sales are booked outside its home turf.

To ease the impact of weaker emerging market currencies, Hyundai has raised vehicle prices in Russia and Brazil, and increased the portion of exports from plants there as well as local parts sourcing.

Lee said Hyundai won’t freeze production in Russia. Instead, the firm’s goal is to boost market share and emerge as a winner when the rouble stabilizes.

Lee reaffirmed that Hyundai is actively considering whether to pay an interim dividend as part of efforts to continuously raise dividend payouts.

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