Korea’s trio scaling up in a down market

Industry

LOS ANGELES — If there was any doubt about the ambitions of Hyundai and Kia in the U.S., the Los Angeles Auto Show should put that to rest. The brands under Hyundai Motor Group are taking an “all of the above” approach to increase volume in a down market and add to their overall share in the process.

Hyundai took the wraps off a concept crossover that is the inspiration for the next-generation Tucson coming next year. The bold lines and aggressive proportions suggest the company is looking for a bigger chunk of the segment. The automaker also presented a freshened Ioniq eco-sedan in hybrid, plug-in hybrid and EV versions.

Hyundai’s entry-level Venue crossover hits showrooms next month, and the Santa Cruz lifestyle pickup has been confirmed for production at its Alabama factory in 2021.

Corporate sibling Kia used L.A. to show the new Seltos crossover that publicly was a “maybe” for the U.S. market. In fact, it looks to be a core product in the entry-level crossover segment. Its traditional looks and all-wheel drive complement the quirky Soul hatchback that Kia unconvincingly calls a crossover.

While Genesis, the luxury arm of Hyundai, didn’t show up with its first crossover — the midsize GV80 — it did bring a heavily freshened G90 flagship sedan and promised a couple of crossovers in the next year or so.

Automotive News caught up with the executives of the Korean brands at the L.A. show to talk about scaling up.

Hyundai Motor America’s business plan calls for sales to grow 4.7 percent this year to 710,000 vehicles, including Genesis, in a market that is trending downward.

The product onslaught and shift from a car-heavy mix to crossovers of every shape and size is going to allow that to happen (Hyundai brand sales are 563,450 through October), even with reduced incentives and fleet sales.

With seven crossovers (including the Nexo fuel cell) in the Hyundai lineup, the automaker expects U.S. sales to grow every year through 2023 and for market share to rise from 4.1 percent through October, according to the Automotive News Data Center, to 5.2 percent on the strength of a vehicle mix that will shift from 52 percent light trucks in 2019 to 67 percent by the target date.

“The fact that Hyundai has taken the time to significantly invest from A to Z makes me really, really proud to be part of this car company,” said Randy Parker, vice president of national sales, who joined the brand from Nissan in May. “They’re not taking their foot off the gas. They’re going to stay in every one of these segments, and they’re going to invest heavily in those segments to ensure that we have the best product offering for the customer.”

“All of the SUVs is what is really fueling our growth. Santa Fe is selling well, Tucson is selling well, Kona is selling well, Kona EV is selling well, Palisade has just been a smash hit; can’t keep them in stock,” Parker said at the show. “Venue will be additional growth for us next year. It’s also going to come from Sonata — we haven’t given up on the passenger-car side of the business. The new Sonata is super impressive.”

Hyundai’s growth will come at the expense of other automakers, but not through an increase of incentives, greater fleet sales and other tricks of the trade to get a temporary volume boost while damaging the long-term value of the brand. Parker said Hyundai is posting lower incentives, reduced fleet sales and greater residual values as it focuses on fresh product to attract new customers and keep current ones.

“Rather than putting numbers on a page and targets, our goal really is all about sustainable growth, and that’s really what we’re focused on. We’re growing right now in a down market, which is good. And if the market picks up next year or the year after or the year thereafter, we’re going to be in a very good position because of our product portfolio,” Parker said. The brand is up 3.3 percent so far this year.

And going forward, Parker said, Hyundai will be quick to update its vehicles on a regular basis to keep them fresh and appealing. “It’s so cool to see that Hyundai will maneuver super fast to ensure that we’ve got the right product at the right time, with the right technology and with the right design,” he said.

Kia’s sales are up 3.3 percent, and much of the growth has come from the new Telluride three-row crossover, which has been a major sales hit while scooping up industry awards. Kia reported a high take rate for the highest SX trim and tight inventory even as Telluride sales reached 45,284 units through October.

Next year, the Seltos is expected to add to that success as a new model in a new segment for the Korean brand, with a sub-$22,000 price tag for the base LX trim with awd and the higher S trim with front-wheel drive, not including shipping.

“Eighteen months ago, we weren’t in two of the most important parts of the market,” said Michael Cole, president of Kia Motors America. “We weren’t in the midsize SUV and we weren’t in the entry CUV. We now have both of those products.”

Cole is not putting a number on growth plans, but he sees opportunities with the new vehicles introduced by the brand and in existing crossover and sedan segments. While other brands move out of the car market, Kia has a new-generation Optima coming next year on the heels of the Stinger sport sedan that serves as a halo for the brand.

“We have been very clear with our dealers [in mid-November] at the dealer conference; we said that one of the keys to our future is to increase throughput per store,” Cole said. “We’re not one of these brands who says that in three years we’re going to do this amount of volume. We’re gonna grow.”

Kia is working with dealers to identify further volume opportunities with the Telluride, Optima and even the compact Sportage crossover, which still has relatively low share in the biggest segment in the market. “We see opportunity for growth in our existing product line and with the new products we’re bringing to the market,” he said.

For the moment, Kia isn’t interested in the extra-small subcompact crossover segment that Hyundai is moving into with the sub-$20,000 Venue, nor in a pickup that could be built on its corporate sibling’s coming Santa Cruz platform.

“It’s not what we’re looking at right now,” Cole said. “We say this very openly with dealers — we have so much opportunity in the core segments of sedans and SUVs, there’s still so much room for growth and opportunity. Maybe one day, but right now we have no [pickup] plans.”

After a rocky rollout of its dealer network over the last couple years, Genesis is poised for growth on the strength of new products. Sales have almost doubled so far this year compared with 2018, following the launch of the compact G70 sedan. But the overall numbers are small: 16,844 units through October from three sedans in declining segments.

That’s about to change, said Mark Del Rosso, new CEO of Genesis Motors North America.

“We will have six vehicle lines by 2021: the three sedans, two SUVs and an EV product,” he said on the sidelines of the auto show. The midsize GV80 will be the brand’s first crossover to go to market, next summer.

“So now we expand into SUV, EV and then you can let your imagination really run wild on what’s possible given the strength of the parent company,” he said. The brand has 350 dealers now operating and ready for new business.

Del Rosso also has a prediction: “We’re going to grow,” he said with a smile. “Our growth is organic; it’s earned, and that’s the beauty of it. When you have organic growth that’s earned, it’s sustainable.”

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