Hyundai Motor Co Prepares To Expand Production Of SUVs

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It is emerging that automaker Hyundai Motor Co (KRX:005380) intends to boost its U.S. production of SUVs by building a new plant in Alabama, sources revealed, but the company denied the speculations. Lower oil prices have boosted the sale of gas-guzzling SUVs and Hyundai wants to take advantage of the strong demand. The development comes just when Ford Motor Company (NYSE:F) also moved production of some small but technologically advanced engines to the U.S. from Spain.

Hyundai plans to expand its U.S. production and Alabama is the possible location of the new factory. The company already has an assembly plant in the state. According to a person with insider knowledge about Hyundai’s plan, the state of Alabama is already negotiating the final terms for the new facility. Some two other sources cited that there were indeed plans to set up a new factory in the U.S., but could not confirm whether things have gotten to a final stage.

Estimated new plant capacity

Analysts have also cited that Hyundai needed to have a second production plant in the U.S. They say that the new plant could have an annual production capacity of 300,000 vehicles. According to the speculations, the new Hyundai factory in the U.S. could be up and running by 2017.

The decline in oil prices is encouraging drivers to shift to vehicles that consume a lot of fuel, pushing up the demand for SUVs.

Sales rise in the U.S.

In February, Hyundai’s U.S. sales rose 4% from the previous month. However, the growth was slower than the market average of 9% in the month. Hyundai successfully survived the global economic crisis that saw a number of companies going for government bailouts to stay afloat.

The current Hyundai Alabama factory builds the Elantra and Sonata sedans. The company builds the Santa Fe SUV at a facility of Kia Motors in Georgia.

Ford move engine production to U.S.

The rumored plans by Hyundai to increase U.S. production follows Ford’s move to bring the production of EcoBoost engines to the U.S. The company said that the production of the 2-liter and 2.3-liter EcoBoost engines will be produced at its Cleveland engine plant.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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