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Hyundai, Kia Predict Reduced Growth For First Time In More Than A Decade

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On: Thu, Jan 8, 2015 at 3:20PM | By: Carl Malek


Hyundai, Kia Predict Reduced Growth For First Time In More Than A Decade

Following a strong 2014 which saw the two companies post a record sales year with more than eight million units sold, Hyundai and Kia are preparing for a much chillier 2015 sales season. Increased pressure from Japanese rivals as well as a major slowdown in overall sales growth could put the squeeze on the bottom line for both Hyundai and Kia as the year marches onward.

Both companies claim that they will experience a meager increase of just 2.5 percent in overall sales for 2015, a mere shadow of the four-percent growth that the two experienced in 2013 and 2014; if that forecast holds up, 2015 would become the worst year for sales growth in more than a decade. A key factor is the noticeably weaker yen which will give Japanese rivals such as Honda and Toyota a competitve edge for the majority of the year when compared to the strength of the Korean won. Another gowth-stunting factor is the continued erosion of Hyundai Kia's domestic market share in Korea; foreign competiton from the likes of Volkswagen, BMW, and General Motors have made notable gains in recent years.

To address this slowdown in sales, Group Chairman Chung Mong-koo revealed several steps that Hyundai and Kia will undertake to try to remain competitive in the marketplace. These include cutting costs, increasing overall production, improving technlogy sharing between the two brands, and increasing the amount of money invested into research and devlopment. These measures were unveiled as part of Mong-koo's candid comments to the Detroit News during preparations for the 2015 North American International Auto Show, set to take place in Detroit, Michigan later this month.

Meanwhile, Japanese automakers are poised to take full advantage of the weak yen by increasing domestic production of new models, a tactic that has been utilized by Japanese automakers in prior instances of a sluggish yen. It's a move which has raised vociferous criticism from rivals claiming that the weak yen and the strong goverment control of the currency by the Japanese government gives the firms an unfair advantage in world marketplaces. While no major action has been undertaken so far, Subaru appears to be the first Japanese automaker to take advantage of the situation, reportedly scrapping plans for moving production of its XV Crosstrek CUV from Japan to the U.S. due to the disparity between the yen and the U.S. dollar. Expect other Japanese firms to follow Subaru's lead as the year progresses with a stance towards domestic production of many of their current models versus sending production abroad.

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