Hyundai hangs tough as sales soften

HYUNDAI is facing an uphill battle to maintain its strong run of sales growth in Australia and secure a top-three position in the new-vehicle market as demand for passenger cars weakens and with model restrictions that will see it lose representation in the booming small-SUV segment.

In a wide-ranging interview with GoAuto this week, Hyundai Motor Co Australia (HMCA) chief operating officer John Elsworth admitted that the burgeoning small-SUV segment – up 31 per cent this year – was growing faster than the company had anticipated, magnifying the impending discontinuation of the ix35.

With no prospect of the new ix25 coming to Australia due a lack of safety equipment, the soon-to-be-launched one-size-larger Tucson is set to become a lynchpin for Hyundai, which is the number-four automotive brand in Australia behind Toyota, Mazda and Holden – and has designs on securing a permanent top-three position.

To help it get there, HMCA is expecting the Tucson to challenge Mazda’s CX-5 as the top-selling SUV in the marketplace, which translates to more than 21,000 new registrations a year.

This would see it win a few thousand extra sales over the ix35 once the latter retires, but is not expected to be enough to compensate for softening sales of its passenger cars, including the top-selling i30 (down 13 per cent this year).

Left: Hyundai Motor Company Australia chief operating officer John Elsworth.

And after six solid years of sales growth, Hyundai currently finds itself in negative territory after four months of trading in 2015 – down 1.2 per cent overall on the same point last year.

Its full-year result in 2014 passed the 100,000 sales mark for the first time to be less than 700 units behind Mazda.

“Hyundai is a very target-driven business so we base our performance against ourselves,” Mr Elsworth said.

“Obviously, we set those numbers last year, but we month-on-month benchmark those numbers against ourselves and our business plan.

“The continued growth of small SUVs and how strongly and how they’re powering along hasn’t necessarily caught us by surprise, but they’re certainly growing faster than we anticipated.”

Mr Elsworth was quick to point out that the five-year-old ix35 is still holding its own in the segment (up 6.0 per cent year to date), but was mindful that one of Hyundai’s cornerstone cars is about to disappear from the market.

“We’ve got what we’ve got, the last (ix35) models have been produced and they’re on their way, but we’re pretty bullish about that,” he said, gesturing to a new Tucson parked next to us at HMCA’s Sydney head office.

“From a volume point of view, the Tucson is the car that fits in one of the biggest-growing segments – certainly that’s where all the heat is in the market.

“So getting two production sources from Czechoslovakia and South Korea gives us the best ability to maximise our volume. If we go with one or the other, we really are limited.”

Higher-grade Tucson’s are set to come from the Czech Republic, with entry- and mid-level cars to be sourced from Korea.

This is not the first time Tucson has been sold here, and Mr Elsworth is confident that current ix35 buyers will still consider a Tucson rather than switch to another brand.

“For people to move from ix35 to Tucson, all of our research suggests there won’t be a problem. It’s more about the car than the name,” he said.

“The Tucson is marginally bigger in every dimension, but not hugely so. Tucson is now the latest platform, the freshest styling and we think it’ll do really well.”

Mr Elsworth would not be drawn on target numbers for Tucson, but believes it will give the overall SUV market leader, Mazda’s CX-5, a nudge.

“(HMCA’s expectations are) around about (CX-5) volume, but I doubt we’ll topple them,” he said.

Adding a third, smaller SUV to bookend the Tucson and the large Santa Fe is still at least two years away.

“I think most Hyundai distributors on the planet would want one (small SUV),” he said.

“It’s not as easy as clicking your fingers to pull a car forward, but it’s still a couple of years away from our point of view to have a car that meets all the safety regulations for Australia.

“There’s not much we can do about it, so we’ve just got to bide our time and focus on what we can sell.”

Without a one-tonne utility or other desired models such as a luxury SUV coming any time soon to boost volume, Hyundai must contend with a current catalogue chock-full with passenger cars – a category that is experiencing a steady decline in sales and is down 4.4 per cent this year.

Hyundai’s overall passenger car sales are in line with this decline, down 4.5 per cent YTD with the i20, i30, i40 and Elantra all in negative territory, and the new Genesis accounting for less than 200 sales over four months.

“It’s a bit of a tough battle,” he said of the Genesis. “That said, we knew it would be hard, because we’re trying to extract people out of very established brands, and brands they’re probably happy with.

“We’d love to be selling more we’re selling around 50 cars a month and we’d like to be selling double that. We just have to be patient.

“I think it’s similar to the other passenger car segments where people are getting out of (luxury) cars and into SUVs.”

The 25-year veteran of the Australian car industry – previously with Holden as sales, marketing and aftersales director – is also optimistic about Hyundai’s passenger-car sales, despite the tough conditions.

“Passenger cars certainly aren’t as strong this year as SUVs it’s not where the action and growth of the market is,” he said.

“That said, we are holding our own. In any given month, we can be number two in passenger cars and that’s driven a lot by the sedans we do sell.”

With a resurgent Mazda up 4.5 per cent this year and Holden slipping to third place with a worrying 10.1 per cent drop in sales to the end of April, Hyundai is now looking to take third position from the lion brand in year-to-date terms after outselling it last month.

But Mr Elsworth insists he pays little attention to his former employer.

“We don’t look at any measure of success as whether we beat Holden or not,” he said. “If the outcome of (our sales) is we grow in the rankings, great.

“We would never want to go backwards, because it means we set our business plan incorrectly.

“If we catch Holden, that’s nice, but it’s not something we need to do in this business to think we’ve had a successful year.”