Hyundai Motor is to develop a pick-up truck for the US market, according to Reuters. IHS Markit forecasts production of the pick-up will begin at the automaker's plant in Alabama, United States, in 2019.
IHS Markit perspective
- Significance: Hyundai has decided to develop a pick-up truck for the US market, according to media reports, citing a top US executive.
- Outlook: Hyundai is making the move as part of a wider effort to pivot to a stronger utility vehicle line-up, as well as to address sales declines. To varying degrees, all OEMs are facing the issue of how to more react to the change in consumer preferences to utility vehicles. Adding the Santa Cruz appears to be part of a broader strategy and has the potential to shift the brand to a more youthful and fresh image. Offering a pick-up in the US that does not directly take on the domestic brands' full-size pick-up trucks likely offers Hyundai a stronger chance of success.
A Hyundai Motor America executive has confirmed Hyundai Motor group has approved plans for the automaker to develop a pick-up for the US market, according to Reuters. The new truck is reported to be part of the company's efforts to shift its product line-up to include more utility vehicles and away from sedans. The report cites Michael O'Brien, vice-president of corporate and product planning for Hyundai Motor America, as the source of the confirmation of the decision. O'Brien told the news agency that Hyundai Motor has given the green light to the development of a pick-up for the US market, which is expected to be a production version of the Santa Cruz concept for the United States shown in 2015.
In addition, the report states that Hyundai is planning to introduce three new or updated utility vehicles in the next three years, including the B-segment Kona due later in 2017. An all-new seven-passenger, which will replace the three-row Santa Fe Sport, is due in 2019 and a redesigned Tucson is expected in 2020.
Outlook and implications
Hyundai's sales have declined 10.1% year on year (y/y) in the US in January‒July, including the sales of the Kia and Genesis brands. The Hyundai brand's car sales have declined 22.6% y/y over the same period. The company's effort to pivot to a stronger utility vehicle line-up is also an effort to address the sales declines. To varying degrees, all OEMs are facing the issue of how to react to the change in consumer preference to utility vehicles. Adding the Santa Cruz appears to be part of a broader strategy and has the potential to shift the brand to a more youthful and fresh image. Offering a pick-up in the US that does not directly take on the domestic brands' full-size pick-up trucks likely offers Hyundai a stronger chance of success.
Hyundai has long studied the US full-size pick-up truck market, but has not yet committed to joining it. The Santa Cruz will attack the US truck market from a completely different angle and production will likely be in the US to ensure it avoids the 25% tariff currently in place on imported pick-up trucks. With the Santa Cruz and other expected new sport utility vehicle (SUV) entries, IHS Markit forecasts that Hyundai will see its US product mix shift from 67% cars and 29% SUVs in 2016 to 58% cars, 34% SUVs, and 3.5% pick-ups, with 3.7% of its sales in the Sport category.
The pick-up is expected to be a variation of the Santa Cruz concept shown at the North American International Auto Show (NAIAS) in 2015. The company also displayed a similar, but smaller, concept in Brazil in late 2016. IHS Markit forecasts vehicle production of the pick-up will be at Hyundai's plant in Montgomery, Alabama, US, and that the vehicle will share a platform with the next-generation Santa Fe. We also forecast some completely knocked-down (CKD) production will be added to a Hyundai facility in South Africa in the next decade. Total production of the pick-up is forecast in the range of 60,000 units per annum (upa) from 2020, with production starting in 2019. North America is forecast to be the largest market for the vehicle, with sales forecast at a little under 30,000 upa, and the second largest market is forecast to be the Middle East and African region, with sales of about 20,000 upa.
Assuming the pick-up does align with the Santa Cruze concept from 2015, the new product is expected to be notably smaller and less rugged that mid-size pick-up truck entries from Toyota (the Tacoma), General Motors (GM; the Chevrolet Colorado and GMC Canyon), and Honda (the Ridgeline). Ford and Jeep are also planning new pick-up trucks for 2019‒20. The Ranger is expected to offer a formula more similar to the Toyota Tacoma and GM pick-ups (the Chevrolet Colorado and GMC Canyon), while the Jeep Wrangler-based product may be somewhat smaller and designed more for off-road, lifestyle truck use than for traditional work truck use. Hyundai's Santa Cruz concept was initially conceived to reach urbanites who needed something small and efficient for their daily city lives, but capable enough for active weekends. If the production vehicle aligns with this concept, it will be a unique entry. Honda's Ridgeline, also a unibody truck, is also optimised for lifestyle use, but offers a size that is competitive with the Toyota and GM products. The Santa Cruz is more likely to be successful with buyers new to a pick-up. In the US, traditional truck buyers tend to be brand loyal and focused on what the vehicle can accomplish from a towing and payload perspective, even if they do not access that full capability often. With the new entry, Hyundai will probably be aiming essentially to create a new segment, one that has been discussed among various OEM planning departments for years, such as with the Toyota A-Bat concept of 2008. It appears Hyundai will be the first to execute a small, unibody pick-up for the US; the brand may create a niche for one, but if the product generates notable success, we may see copycat products arriving.
On the potential of the Creta STC, the Brazilian market already offers a number of small, car-based pick-up trucks in the B-segment, including the Fiat Strada, Renault Duster, and Volkswagen Saveiro. If approved, we would expect the Creta to share the family design of the US Santa Cruz, but would likely be a smaller product better suited for that market. Media reports have suggested that the Creta STC has been approved; IHS Markit will add the product to its forecast if there is further information indicating production is to begin. In Brazil, the B-pick-up segment has been in decline over the first seven months of 2017, as consumers gravitate toward SUVs. Sales in 2017 to the end of July are down 9.2% y/y and July's sales in the segment have declined by 23.6% y/y.
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