January 8, 2016 / 12:30 AM / 2 years ago

Hyundai to make Santa Fe Sport SUV at Alabama plant

An employee sits in front of the logo of Hyundai Motor Co. at its dealership in Seoul, South Korea, October 22, 2015. REUTERS/Kim Hong-Ji

DETROIT/ SEOUL (Reuters) - Hyundai Motor Co (005380.KS) said on Thursday it will start making its Santa Fe Sport at its Montgomery, Alabama, factory in early summer to increase supply for the quick-growing crossover sport utility vehicle (SUV) segment of the U.S. market.

The announcement comes as the South Korean automaker grapples with stagnating sales of its mainstay sedans such as the Sonata as low oil prices drive sales of petrol-guzzling SUVs and trucks.

The Santa Fe Sport, a five-passenger crossover, will be one of three models made at the plant, joining the Sonata and Elantra sedans.

The two-row Santa Fe Sport production facility will supplement production of the model at a factory in the state of Georgia operated by corporate sibling Kia Motors Corp (000270.KS), which makes Kia’s Sorento SUVs and Optima sedans.

“The Santa Fe Sport is likely to replace some Sonata production as sedan demand is not strong,” said analyst Cho Soo-hong at NH Investment & Securities.

Hyundai plans to build about 30,000 Santa Fe Sport vehicles in Alabama from June through December, a person with knowledge of the matter told Reuters.

The SUV’s output at the Kia factory is likely to be 105,000 vehicles this year from 114,000 last year, the person said on condition of anonymity because the information is confidential.

Hyundai said production targets for the Sonata, Elantra and Santa Fe Sport will be determined in coming months, and that the Alabama plant’s capacity will remain at 400,000 vehicles a year.

Crossover vehicles have taken U.S. market share from sedans with their higher profile, increased practicality and car-like driveability. Crossovers are based on car chassis whereas regular SUVs are based on truck chassis.

The Santa Fe Sport seats five passengers, putting it in the small crossover category, the fastest-growing segment of the U.S. market.

“The new production will help us meet the growing demand for one of our most popular products,” said David Zuchowski, president of Hyundai North America.

The larger Santa Fe crossover, which has three rows and seats six or seven passengers, will continue to be produced in South Korea.

Last year, Santa Fe Sport sales were constrained in part because of production capacity. Sales rose 6 percent to 86,433 vehicles, while sales of the bigger Santa Fe increased 19 percent to 31,701.

Reporting by Bernie Woodall in DETROIT and Hyunjoo Jin in SEOUL; Editing by Bernard Orr and Christopher Cushing

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