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Hyundai sales slump in China over North Korea, standoff with Chinese partner

BEIJING/SEOUL — Hyundai is at loggerheads with its Chinese partner over efforts to cut supplier costs, as they grapple with cutthroat competition and the impact of a standoff between Beijing and Seoul. Hyundai, along with affiliate Kia, has been caught up in a political row over a missile defense system that is being deployed in South Korea, but opposed by China, as tensions grow over North Korean missile tests and last week's test of a nuclear bomb the North claims can be mounted on a missile. Sales of Hyundai cars in China have been falling, part of a backlash against South Korean brands over the missile system that China views as a threat to its own national security. On Tuesday, South Korea asked the United States to lift a limit on the explosive payloads it can use in the missile system. This as a North Korean missile, believed to be an intercontinental ballistic missile, was being tracked by intelligence services being moved on the ground toward North Korea's west coast and a possible launch site. That has come against the backdrop of ever tougher competition from local Chinese automakers. Until last year, Hyundai and Kia ranked third in China by sales. But Hyundai's sales alone have slumped 41 percent from January to July, fraying relations with local partner BAIC Motor Corp and making this the biggest crisis since Hyundai entered the Chinese market in 2002. Last month, Hyundai suspended production at its four China plants for a week after a French supplier refused to provide fuel tanks when its bills went unpaid. On Tuesday, Hyundai suspended production at one of its plants in China after a German firm went unpaid. Hyundai and BAIC — whose Beijing Hyundai joint venture is a 50:50 partnership — are divided over how to solve the issue of suppliers and tougher competition. Hyundai wants to protect its South Korean supply chain, while BAIC favors shifting to cheaper Chinese suppliers to cut costs, the people said. "BAIC wants to solve this aggressively and is ... asking Hyundai to change its sourcing strategy significantly and immediately," said the head of a Hyundai supplier based in Seoul, adding the idea was to source more locally from cheaper suppliers in China. Hyundai wants to solve this more gradually "over perhaps 5-10 years and do so in phases," the person said. BAIC declined to comment.

Hydrogen stations that don't work putting a dent in H2 lifestyle

Hydrogen is the most plentiful element in the universe, but it's not abundant enough for some hydrogen fuel-cell vehicle drivers. Southern California lessees of models such as the Hyundai Tucson Fuel Cell SUV are taking to Facebook to voice their complaints about out-of-order fuel cell stations, Green Car Reports says. In many cases, the lack of hydrogen supply has made the cars effectively undriveable. For Tucson Fuel Cell owners, the hydrogen is supposed to be free and unlimited, but Hyundai doesn't manage the stations. One Orange County lessee of a Tucson fuel-cell vehicle hasn't driven the car for over a month because the trio of nearby stations are out of commission. Additionally, some of the stations that do work can only provide about a half-tank worth of hydrogen, once again putting a crimp the driving range of the hydrogen car. California is home to 10 of the dozen public hydrogen refueling stations in the country (there's one each in Connecticut and South Carolina), according to US Department of Energy figures. These sorts of challenges can't help Hyundai's hydrogen efforts. Last month, it was reported that Hyundai has sold fewer than 300 fuel cell vehicles worldwide during the past three years, including about 70 through the first five months of this year. The South Korea-based automaker has said it wants to sell 1,000 fuel-cell vehicles globally by the end of 2015. Fuel-cell drivers and advocates alike are hoping that Toyota will change the game when its Mirai hydrogen vehicles start hitting California roads later this year. Toyota confirmed in May that Mirai US sales would start in October in eight California dealerships. The Northeast is on tap for 2016. Related Video:

Hyundai mulling new small CUV under Tucson

Hyundai maintains it can barely build enough of its core models to satisfy North American consumers, but that doesn't mean it isn't keen to expand its offerings to capture developing segments of the market. According to Edmunds, one of those expanding niches could be the burgeoning subcompact crossover segment. The website quotes Hyundai North America president and CEO John Krafcik as acknowledging his company is "very under-represented" in crossovers, the market's hottest vehicle type.
With the discontinuation of the Veracruz, Hyundai is down to two CUV nameplates, Tucson (pictured) and Santa Fe, the latter of which covers two segments with a two-row Sport and long-wheelbase three-row model. And while Hyundai commands seven percent of the US sedan market, the company estimates it only has two percent of the truck segment.
And while Krafcik stops short of confirming a new model, he acknowledges "a new segment is emerging" underneath the Tucson and says, "I think it's something to look at." At the moment, the subcompact softroader segment remains small and somewhat amorphous, with tiny CUV offerings like the Buick Encore, Nissan Juke, and now-discontinued Suzuki SX4 illustrating that there are a lot of different ways to package and market such a vehicle.