Hyundai cranked up South Korea output for the US just as factories in that key export market were shuttering production in March due to the coronavirus pandemic, a move that is now proving costly, a media report said.
Reuters said Hyundai boosted domestic production to as much as 98% of capacity by late March because the Korean market was recovering from a bad February and also because it expected demand for Tucson SUVs and other models in the US, its biggest overseas market outside of China.
The automaker shipped 33,990 vehicles to the US in March, up 4.3% year on year, according to company data cited by the news agency.
Consignments of cars shipped from South Korea are now sitting in US ports with dealers slow to take deliveries because of slumping sales and rising stock, four sources told Reuters which noted it could not independently verify how many vehicles shipped by Hyundai – and other automakers – were held in US ports.
The news agency said Hyundai had idled a Tucson production line in South Korea last week for five days while analysts now expect a sharp drop in first quarter operating profit when it reports results on Thursday and some even forecast a second quarter loss.
Only about half of the Hyundai vehicles sold in the US are made in the Alabama factory compared to between 68% and 85% for Toyota Motor, Nissan Motor and Honda Motor, which have also suspended production there till May, Reuters said.
Hyundai's South Korean factory operation, which had recovered from a component shortage from China to nearly 100% capacity by March, could fall to as much as 70% in April, the company recently told analysts.
"Hyundai Motor has been maintaining strong cooperative relationship with our dealers around the world and we will overcome this difficult time by further enhancing collaboration with our dealers," the automaker said in an emailed statement to Reuters.
"We will work to maintain the optimal level of inventory at each step of the supply chain… aiming for a faster recovery than others when the crisis softens."
Reuters said, demand recovery in its domestic market, also Hyundai's biggest, was expected to compensate with new COVID-19 cases dropping to nine on 21 April from a peak of 909 on 29 February, without drastic measures such as lockdowns.
Domestic sales in March hit their highest level in more than four years, up 80% from February, helped by a consumption tax cut.