(Reuters) - Hyundai Motor Co’s (005380.KS) European business has deferred its sales and market share target by at least a year due to a dismal outlook that is now starting to worry the stronger carmakers as well as the weak.
Plunging car sales in markets such as Italy, where demand has plumbed lows not seen in decades, has prompted carmakers such as GM’s (GM.N) Opel and Fiat FIA.MI to record heavy losses at their European operations.
“I suspect the whole plan of selling 500,000 cars next year and achieving 5 percent market share in 2015 is being deferred by one year to be realistic, because the market decline exceeded our expectations,” said Allan Rushforth, Chief Operating Officer of Hyundai Motor Europe in an interview published on Wednesday.
“So 2013 should give us half a million, with the 5 percent achievable in 2016 at the earliest.”
For the current year, Hyundai forecasts sales to rise about 10 percent to 445,000 cars this year and aims for a 3.5 percent share of the European market.
Only five years ago its share was roughly half the size and Rushforth expects to add another 0.1 or 0.2 percentage points in 2013.
Rushforth was relaxed about the outcome of France’s request that the EU require South Korea to give advanced warning of planned car exports to the EU, the first step towards the possible re-introduction of duties a year after a free-trade deal came into effect.
“Our business was growing long before the FTA (free-trade agreement) really had a material affect, and it will continue to grow,” he said, referring to the gradual phase-out by July, 2016 at the latest of tariff duties that had been as high as 10 percent.
Unlike European rival mass market brand Chevrolet, which imports effectively all its cars from Korea, Hyundai only manufactures the i40 mid-size car, Santa Fe SUV and Veloster sports coupe in Korea.
Hyundai builds the bulk of its European lineup — consisting of the i20 subcompact, ix20 MPV, i30 compact and ix35 SUV — in low wage countries Czech Republic and Turkey.
Together these models comprise about 70 percent of the brand’s volume, with another 18 percent imported from India in the form of its i10 microcar.
French automaker Renault (RENA.PA) imported some 4,400 Korean-built vehicles from its Renault Samsung Motors subsidiary into France in the period - more than twice Hyundai’s imports from the country.
Carmakers, such as PSA Peugeot Citroen (PEUP.PA) and Fiat FIA.MI, have suffered heavy losses at their European operations as the euro zone crisis dents consumer demand.
In the past few weeks, carmakers, including Volkswagen (VOWG_p.DE), Mercedes-Benz (DAIGn.DE), that had so far successfully navigated the crisis have warned that demand is shrinking at a rate they had not foreseen.
Whereas Porsche said it will protect its high profit margins by investing less and delaying the odd project, for example, Hyundai Europe aims to ramp up spending to promote the brand and reduce the customer churn rate.
“Eight out of 10 people cannot spontaneously recall our brand in marketing studies so we’ve drafted a brand strategy for Europe which will be presented to headquarters in mid-October,” he said.
“Historically over the last five years customer retention has been in the bottom quarter (among carmakers in Europe). We’ve been very much a stepping stone, but we are starting to reverse the tide,” Rushforth added.
Sources familiar with the matter told Reuters that the new strategy involves a return to motorsports.
Reporting By Christiaan Hetzner; Editing by Louise Heavens