Hyundai sees European car demand shrinking in H2

July 29 (Reuters) – Hyundai Motor Co (005380.KS), South Korea’s top automaker, expects car demand in Europe to shrink in the second half as government incentives for new cars are phased out, an executive said on Thursday.

Hyundai executive vice president Lee Won-hee said the world’s No.5 car maker along with its affiliate Kia Motors Corp (000270.KS) saw sales growth in China slowing down slightly in the second half, although it would still be strong.

Hyundai expects to maintain strong growth with new models and is likely to exceed its business targets, Lee told investors. (Reporting by Cheon Jong-woo; Editing by Jonathan Hopfner)

Hyundai domestic sales slump in May

(Reuters) – South Korea’s largest carmaker, Hyundai Motor Co Ltd (005380.KS), posted a steeper-than-expected 23 percent decline in domestic sales in May as competition stepped up, pulling its shares to a three-week closing low.

Hyundai, one of the top global performers during the financial crisis and sales slump that followed, continued to post a rise in overseas sales in May. But it was the sole Korean automaker with falling local sales for two months in a row in the face of new model launches by affiliate Kia Motors Corp (000270.KS) and aggressive marketing of imports by rivals such as Toyota Motor Co (7203.T).

“A second consecutive fall in domestic sales is quite worrying, although year-ago comparison numbers were relatively high,” said Lee Sang-hyun, an analyst at NH Investment & Securities.

“It was hit by aggressive marketing by rivals and new model launches by Kia and Renault-Samsung and those factors may continue to depress domestic sales, although Hyundai plans to introduce new models later this year.”

Hyundai lowered the price of its Genesis sedan from Tuesday by dropping some of its more expensive options as foreign cars, including Daimler’s (DAIGn.DE) Mercedes-Benz, gain ground at more affordable prices.

It could face a further battle after Ssangyong Motor (003620.KS), the country’s smallest carmaker, drew seven preliminary bidders, including France’s Renault SA (RENA.PA) and India’s top utility vehicle maker Mahindra & Mahindra (MAHM.BO) last week in a deal worth up to $500 million.

The participation of high-profile international firms in the auction was seen as a potential threat to the dominance enjoyed by Hyundai and Kia, which controls 80 percent of South Korea’s auto market.

Hyundai shares extended losses after the monthly results before closing down 5.4 percent, its lowest close since May 11. It was the sixth-worst performer on the KOSPI for the day.

The stock spiked to a record high in mid-May, up as much as 21 percent in 2009 and outperforming a 1 percent rise in the wider market on expectations of strong sales. The stock is now almost 10 percent off its peak.

Overall May sales climbed 19 percent to 298,036 vehicles from a year earlier, but sales at home fell 22.7 percent to 49,228 units, missing Nomura’s forecast of a 15 percent drop. Sales of its YF Sonata sedan, which was launched late last year, almost halved in South Korea.

“May of last year saw a sharp increase in sales with the introduction of the clunker subsidies and ahead of the end of consumption tax cuts,” Hyundai said in a statement.

“That made the pace of sales fall bigger, and deepening competition for major models weighed on May sales.”

In contrast, overseas sales jumped by a third to 248,808 cars last month, above market expectations, helped by a series of upgraded models. However that still represented a month-on-month decline of 7.1 percent.

Hyundai’s average incentive levels are much lower than the industry average in the U.S. market and concerns about a slowdown in world economic recovery on European debt woes may cloud Hyundai’s second-half outlook.

But analysts say the weaker won following tensions with North Korea should prop up Hyundai’s overseas sales.

The full launch of Kia’s U.S. plant in Georgia, which produces Sorento R SUVs, bumped up its overseas sales by 46.1 percent.

Ssangyong Motor more than doubled May sales from a year earlier, selling a total of 7,028 vehicles at home and abroad.

($1=1194.5 Won)

(Additional reporting by Miyoung Kim and Cheon Jong-woo; Editing by Nick Macfie and Lincoln Feast)

Ford Outsells GM in Februrary, Toyota Down 9 Percent

DETROIT – Ford posted a 43 percent jump in February U.S. auto sales and outsold General Motors for the first time in nearly a dozen years as it grabbed sales from struggling Toyota.

Ford Motor Co.’s sales surged thanks to strong demand for its cars and because it was able to grab some customers from Toyota Motor Corp., whose sales fell 9 percent due to a massive safety recall. Ford sold 334 more cars than GM in the U.S. for the first time since August 1998, when GM was in the midst of a strike.

Besides Ford and GM, other winners included Kia Motors Corp., Honda Motor Co. and Nissan Motor Co. Even struggling Chrysler saw improvement.

February was the first full month since Toyota’s Jan. 26 decision to halt sales of eight popular models in the U.S. because of safety concerns. Those cars went on sale again as dealers repaired them, but Toyota’s image suffered from the recall of millions of vehicles and congressional hearings on its safety record. Analysts had expected Toyota to see a double-digit drop in sales for the month. The Japanese automaker jacked up incentive spending to lure buyers.

General Motors Co. reported an 11.5 percent increase, helped by new models and Toyota’s woes.

Susan Docherty, GM’s vice president of sales and marketing, said GM won over some Toyota buyers who left the Japanese carmaker due to the recalls. Chevrolet car sales to individuals rose 10 percent in February, an indication that GM it taking some of Toyota’s core market, she said.

“We feel we’re getting our fair share of the Toyota business,” she said.

Mike DiGiovanni, GM’s top sales analyst, said he expected that trend to continue into the spring.

Most carmakers offered deals to Toyota customers for trading in their vehicles. According to Edmunds, incentive spending rose 11 percent from January to $2,588 per vehicle. Toyota’s incentive spending rose 26 percent, to $1,833 per vehicle.

GM’s sales of its Buick, Chevrolet, Cadillac and GMC brands climbed 32 percent. GM plans to keep those four brands and is phasing out Pontiac, Saturn and Hummer. It has sold Saab.

The industry was expecting to see gains over February 2009, which was one of the weakest months in a very depressed year. Sales over President’s Day weekend — which traditionally kicks off the spring selling season — were robust, according to the auto information site Edmunds.com.

Still, winter storms at the beginning and end of the month hurt sales on the East Coast and in the Midwest. GM said its sales dropped 22 percent in the Northeast region. The corridor from Boston to Washington typically accounts for about a quarter of the automaker’s U.S. sales.

“Three and a half feet of snow on these cars. It took our dealers a bit of time to get all that snow off here and get the customers back into the showrooms,” Docherty said.

DiGiovanni said sales probably would have been 5 percent higher had it not been for snowstorms. That means the gradual economic recovery is continuing despite setbacks in home sales, new home construction and unemployment, he said. Consumer confidence — which is measured by how much buyers spend — took an unexpected dive in February, indicating people are nervous about the economy.

Much of GM’s sales increase was due to demand for large new wagons such as the Chevrolet Equinox, which jumped 133 percent, and the Cadillac SRX, which saw sales more than quadruple. Those two models are the size of SUVs but are built on a car frame for better fuel economy.

Sales to rental car companies and other fleet buyers also were strong as companies began buying again after cutbacks last year. Fleet sales generally mean lower profits to automakers than retail sales to individuals.

Retail sales for GM’s four core brands edged up 7 percent.

Ford had expected sales to climb from last February, when U.S. sales plummeted in the midst of the recession. Its car sales climbed 54 percent as consumers continued to shop for more fuel-efficient vehicles. Like GM, Ford saw renewed demand from corporate fleet customers, which are buying again after weak sales in 2009. Ford’s fleet sales surged 74 percent over February of last year, while GM’s jumped 114 percent.

South Korea’s Kia Motors Corp. saw U.S. sales rise 9 percent on brisk demand for its Sorento and Soul, a boxy vehicle aimed at city dwellers. Japan’s Honda said sales rose 13 percent, lifted by its top-selling Accord sedan, while Nissan sales surged 29 percent, as sales of its Versa subcompact doubled. Subaru reported a 38 percent jump.

Chrysler will report its first year-over-year monthly increase since December of 2007 when it releases numbers later Tuesday, according to a person briefed on the figures. The increase will only be a few hundred vehicles, but the person said it’s a sign that the company is starting to recover in the U.S. market. The person did not want to be identified because sales figures have not been released.

Surging sales of large wagons helped Japan’s Subaru, which said its February sales in the U.S. jumped 38 percent led by the Outback and Legacy sedan. Both vehicles got a redesign for the 2010 model year. Sales of its Forester SUV were up 6 percent.

Hyundai to go ahead with eco cars

Hyundai Motor Group, the world’s No. 5 automaker, will go ahead with plans to develop environment-friendly cars despite the segment’s low profitability and an industry downturn, a senior executive said on Thursday.

Yang Woong-chul, president of the group’s auto research and development division, also said the group saw almost “no problem” to its business from the won currency’s recovery trend. A weaker won has helped Hyundai and other South Korean automakers by enhancing price competitiveness and boosting profits from overseas markets.

“It is difficult to get profits from those kinds of cars. But we have to go that way eventually so will go ahead with our eco-friendly model plans,” Yang said in an interview with Reuters on the sidelines of the Seoul Motor Show.

The group usually allocates 5 percent of sales for R and D and spends 20-30 percent of that budget on environment-friendly models such as hybrid cars, said Yang, who is in charge of auto technology for South Korea’s top two car makers — Hyundai Motor Co and Kia Motors Corp.

Hyundai plans to start mass production of hybrid cars next year and to begin mass production of plug-in hybrids from late 2012.

“The technology has been perfectly proved, but we need time to set up the infrastructure for the models,” Yang said.

The remarks came as General Motors Corp has asked for $2.6 billion in low interest government loans to support the development of three new hybrid vehicles, confirming that it intends to move ahead with production of variants of the all-electric Chvrolet Volt.

Hyundai has unveiled the Elantra LPI, a hybrid version of the popular compact car, which will be powered by liquid petroleum gas (LPG) and lithium polymer batteries. South Korea’s LG Chem, which is set to supply battery packs to the Volt, will be the sole provider of batteries for the Hyundai hybrid.

NO WON WORRIES

The recent rise in the won is unlikely to pose any threat to the group as it has not made plans based on the currency’s weakness, Yang said.

“We do not rely on foreign exchange rates. So there will be almost no problems for our business from the won’s recovery trend,” he said.

The South Korean currency had risen about 16 percent by Wednesday since March 6, when it hit an 11-year low, and is seen recovering further as worries about the global financial crisis ease.

Yang said he expected global car demand to “slightly” recover on rising appetite for smaller cars and helped by developing markets, but declined to comment on the timing of a rebound.