Hyundai Motor`s U.S. overstock `piling up`

Hyundai Motor Co.`s sluggish U.S. sales has left nearly 100,000 vehicles made at its Alabama plant unsold. Including cars shipped from Korea, Hyundai`s inventory in the world`s largest auto market amounts to 171,000 units.

"Inventories are piling up as the strong won made our cars lose cost competitiveness and high oil prices led to a change in consumer taste," said a senior executive of Hyundai Motor. "The inventory could rise above 120,000 units next month."

As Hyundai set the appropriate level of stock at around 75,000 autos, inventory control is likely to be a crucial problem in the automaker`s U.S. operations, analysts said.

"Since the Sonata sedans and Santa Fe sport-utility vehicles assembled at the Alabama plant are sold across the United States and Canada, the pertinent inventory volume is 75,000 units, or 25,000 units per month multiplied by three months," Hyundai said in a statement yesterday.

"The headquarters (in Seoul) is working out countermeasures to tackle this situation," the company official said.

High fuel prices weighed down demand for the 3.3-liter Sonata sedan produced at the Alabama assembly lines. Korean cars also lost cost-competitiveness against Japanese cars as the won`s value soared. Hyundai is increasingly facing pressure from Japanese peers, who are expanding incentives to rev up small car sales.

The Hyundai Accent compact is tagged $12,565, about $640 more than its rival Toyota Yaris.

Hyundai`s U.S. sales in January dropped 8.2 percent year-on-year to 27,721 units. Toyota Motors Corp., on the other hand, posted a 9.5 percent increase to 175,850 vehicles. Honda Motor Co. sales also gained 2.4 percent to 10,790 units.

As the Sonata`s 2.4-liter engine displacement grew more popular, Hyundai opted to build a plant to roll out the self-developed 2.4-liter engines named "Theta" from next year at the Alabama production site.

Hyundai Motor plans to strengthen marketing activities and partnerships with dealers, while securing more quality dealerships to spur sales.

In a bid to reduce currency risks, the carmaker plans to revise the current 7 to 3 ratio of U.S. dollar-denominated transactions to that in other currencies to 6 to 4.

Hyundai also said it will establish a daily currency rate management system and advance the launch of new models.

"We expect inventories to drop in March, which is a high-demand season," a Hyundai executive said. "The U.S. launch of the Vera Cruz SUV, slated for March, and bolstered local marketing would help improve the situation."

(sophie@heraldm.com)



By Kim So-hyun