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'Carmageddon': Hyundai shifts to SUVs
Brad Harper
Elantra sedans are Hyundai's best-selling vehicles by a wide margin, but the company is about to start building fewer of them at its Montgomery plant. It's a move that industry experts say is a step in the right direction for the future of the Korean automaker.
Hyundai Motor America reported record sales in May, a month when customers bought 22,168 Elantras. That's nearly twice as many as any other Hyundai model.
But Elantra sales are down nearly 30 percent for the year overall while sales surge for the company's Santa Fe compact SUV. Santa Fe sales more than doubled year-over-year as the model almost overtook the No. 2-selling Sonata in May.
That's because SUV-crazed car buyers in North America are flocking away from sedans like the ones Hyundai has ridden to years of success.
Auto sales as a whole slumped last month, largely because sedan demand has dropped off so sharply that insiders are calling it "carmageddon," Auto Trader senior analyst Michelle Krebs said. So, automakers are offering deals to entice people to buy sedans and then propping up their profits through booming truck and SUV sales. That's less of an option for car-heavy Hyundai.
"What we're seeing is heavy incentives on cars, and (Hyundai and Kia) don't have truck revenues to offset that," Krebs said.
The company has spent time and money — $52 million — to give its Montgomery plant the ability to build the Santa Fe Sport. But the plant was already operating near capacity, rolling Sonatas and Elantras off the assembly line around the clock on weekdays and, sometimes, even on weekends.
So, when the plant starts full production of the Santa Fe Sport on June 22, they'll do it at the expense of Elantra production. In all, the plant plans to build 36,700 of the SUVs this year — and 36,700 fewer Elantras.
Those numbers could grow.
"We're just adjusting to market demand," Hyundai Motor Manufacturing Alabama spokesman Robert Burns said.
Workers are training three days a week on a test assembly line to adjust to the taller vehicles, bigger doors and other changes from the usual sedan production. Programmers are modifying robots, and new assembly line processes are being put in place.
As the company works to adjust to the shifting market, there's a lot on the line. And not just for Hyundai.
The company and its suppliers pumped $4.82 billion into Alabama's economy in 2014, according to an AUM study. That total grew $1 billion from 2010 as the company's sales took off.
The Montgomery plant alone had a payroll of $260 million in 2014.
Hyundai doesn't expect to hire more workers in Montgomery as it starts rolling out the Santa Fe Sport here, at least for now.
But the change will keep the busy plant churning. It's built nearly 70,000 cars in the last two months, and HMMA plans to keep the line moving next Saturday to help meet its production goals.
Krebs said Hyundai and Kia remain challenged to compete with more SUV-heavy companies in North America, but she said the shift in Montgomery is a positive.
"The numbers aren't huge, but it's the right move," she said.
Hyundai's record May
Sonata sales down 12 percent
Elantra sales down 5 percent
Santa Fe sales up 123 percent
Santa Fe Sport sales up 74 percent