The Santa Fe Sport. Hyundai believes it could sell lots more if it had the production capacity.
Hyundai plans to add production of its Santa Fe Sport at its assembly plant in Montgomery, Alabama this coming summer, hoping to keep up with a surge in demand for utility vehicles driven, at least in part, by low fuel prices.
The boost in production of the Santa Fe Sport will come at the expense of the Hyundai Sonata, since the capacity of the Alabama plant will remain around 400,000 a year. But that’s no surprise, industry analysts say, as Sonata sales in the U.S. slipped 1.7% in 2015 due to lagging demand for sedans, in general. Sales of the compact Hyundai SUV, however, were limited by a lack of supply.
And Hyundai isn’t alone, said Stephanie Brinley, a senior automotive analyst with IHS Automotive. “What we are seeing in the 2015 results is an increased appetite for SUVs, with sedans taking a hit.”
U.S. auto sales surged to an all-time record in 2015, surpassing the previous peak set in 2000. But the numbers concealed some significant trends. While final numbers haven’t been crunched, IHS was forecasting that passenger car sales of all sorts would slip 1.6% for the year, while all utility vehicles were expected to rise 15%.
The shift was especially notable in the midsize sedan market, long the largest segment in the U.S. Preliminary data, said Brinley, suggested demand slipped to 2.87 million, down from just under 3 million in 2014. And IHS is forecasting another modest dip in 2016.
If demand rebounds, Hyundai can source more Sonata sedans from Korea.
Other industry consultancies predict similar trends, though Alan Batey, president of General Motors North America and Global Chevrolet, cautioned not to right off sedans, stressing that the midsize market is “still significant,” making up one of the largest segments in the industry. That said, he acknowledged that GM is also trying to rebalance its portfolio and adjust production to match.
The Cadillac division, for example, is getting set to replace the old SRX with the new XT5 midsize luxury SUV. But it will add three more crossover-utility vehicles to its mix by the end of the decade, brand boss Johan de Nysschen recently told TheDetroitBureau.com. Chevrolet, meanwhile, plans to slip a new ute into its line-up, just above the current Equinox model. And Buick is about to start importing the small Envision crossover from China.
(Click Here for more on GM’s new crossover plans.)
Then there’s Volkswagen, which is looking to add two more utes to fill in a segment where it has been a marginal player in recent years. The first of these will be based on the CrossBlue concept, and will be produced at VW’s Chattanooga assembly plant which is currently being doubled in size.
For Hyundai, boosting Santa Fe sport production “will help us meet the growing demand for one of our most popular products,” said Hyundai North America President Dave Zuchowski.
Volkswagen shows off a prototype of its new CrossBlue utility vehicle at the Chattanooga plant.
Sales of the crossover jumped 6% last year, to 86,433, and would’ve been even higher if there was more production capacity, Hyundai said. Demand for the larger Santa Fe model, meanwhile, jumped 19%, to 31,701.
Sales of all utility vehicles, including both truck-like SUVs and more car-like crossovers, have grown substantially in recent decades, though demand briefly slipped during the recession, especially as fuel prices started surging towards $4 a gallon. But the upward trend has resumed as the economy recovers and fuel prices remain low.
(Mitsubishi offers sneak peek at new Outlander plug-in. Click Here to check it out.)
Demand has grown especially strong in the compact CUV segment which, for many buyers, serves as a replacement for midsize sedans. Preliminary IHS figures suggested 2015 would end with sales of 2.6 million compact utes and 1.9 million midsize models. With compacts expected to grow to 2.7 million this year, that segment could soon surpass midsize sedans.
That said, the shift may soon stabilize, according to analyst Brinley who predicts that, “Over the next five years, the utility vehicle growth will moderate, and the hit on sedans will moderate.”
Perhaps, but between now and then automakers are likely to add still more utility vehicles to their fleets and continue to rejigger production schedules.
(Chinese-made Buick Envision CUV could generate some controversy. Click Here to learn why.)