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Hyundai's U.S. sales still on track to grow 4.4 percent this year: executive

A visitor walks past a Hyundai Motor logo at a Hyundai dealership in Seoul April 25, 2013. REUTERS/Kim Hong-Ji
A visitor walks past a Hyundai Motor logo at a Hyundai dealership in Seoul April 25, 2013. REUTERS/Kim Hong-Ji

By Ben Klayman

SUPERIOR TOWNSHIP, Michigan (Reuters) - Hyundai Motor Co <005380.KS> still expects its U.S. sales to grow by 4.4 percent this year even though it is dealing with production capacity constraints brought on by the South Korean automaker's decision to slow expansion globally.

In reaffirming a target set in February, North American Chief Executive John Krafcik acknowledged on Friday that the company's U.S. market share was down as it caps vehicle production capacity globally at about 7 million vehicles a year to ensure quality remains high.

"We are running our plants 24-7, three shifts, maximum overtime, doing everything we can to keep up with demand," Krafcik said, adding the decision to limit output has led "110 percent" to the capacity constraints.

"For the last year or so, we have not been able to grow as fast as the market, so we've lost a little bit of share this year," he added. "We have tapped everything at this point."

Krafcik declined to comment on whether Hyundai has a new plant in North America coming. "For now, we've taken a couple-of-year pause," he said. "I can't say when that pause is going to end."

Hyundai said in May that it was considering building new assembly plants outside South Korea. Analysts have said labor disputes in its home market and the rising South Korean currency could push Hyundai to build more vehicles overseas, but the company has said it has no immediate plans to build another U.S. plant.

While industry-wide U.S. auto sales rose 9 percent in June and the annual pace in the month raced to its strongest level since November 2007, Hyundai's sales rose only 1.9 percent.

Hyundai's U.S. sales this year are still on track to hit 734,000 cars and sport utility vehicles, and its market share is heading for 4.7 percent, Krafcik told reporters at the company's technical center outside Detroit. That would compare with sales in 2012 of 703,007 vehicles and a market share of 4.9 percent.

Krafcik expects the company's U.S. sales in the second half of the year to be a little stronger, and acknowledged that U.S. demand has come back a little faster than the automaker thought it would.

Hyundai was the fastest-growing automaker during the recent recession, but its sales increases have cooled due to the lack of availability of new cars. Its 2012 U.S. sales rose 8.9 percent.

Krafcik said the company's U.S. inventory of vehicles was the second-lowest in the industry among non-premium brands at 44 days. That has allowed the company to avoid generous incentives for consumers; the average incentive per vehicle at $1,237 is second-lowest among mainstream brands.

The executive said it does not make sense for Hyundai to put more money into incentives in the U.S. market at this point.

Hyundai previously added a third shift at its assembly plant in Montgomery, Alabama, boosting annual production capacity by 60,000 vehicles. Krafcik said it was possible that more vehicles from overseas could help ease supply constraints in the U.S. market, something that helped incrementally last year.

Hyundai is looking at additional vehicles in the premium segment, but nothing had been approved for production, Krafcik said. A small crossover vehicle below its Tucson sport utility vehicle is another option, he added.

"Our growth potential and where we might want to put future products is probably on the crossover side of the table," Krafcik said. "No plans for that right now, but it seems sort of obvious."

"It's something we have to look at," he added about a small crossover. "It does seem like there's a lot of action in stuff below the (Toyota <7203.T>) RAV4, Tucson size."

(Editing by John Wallace and Chris Reese)

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