Palisade Forum
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By Nam Hyun-woo
Hyundai Motor is in dilemma over the popularity of its Palisade full-size SUV and Nexo hydrogen car on the domestic market, as this may not lead to actual sales, industry analysts said Wednesday.
A growing number of consumers are complaining of having to wait up to 10 months before receiving their Palisade, while the government subsidy for the Nexo is running out due to higher-than-expected demand.
The analysts said Hyundai Motor's excessively "conservative" demand expectation has led to it failing to supply enough cars, raising worries that the company may lose a good opportunity to recover from its earnings slowdown.
According to industry officials, Hyundai Motor has received more than 52,000 orders for the Palisade since the SUV's launch in December. This is more than double the company's initial expectation of 25,000.
This has created an unprecedented waiting list for customers. A Seoul-based Hyundai Motor dealer said it takes at least seven months for delivery if the customer orders one now, and up to 10 months if they want a unique color option or the deluxe model.
"For customers, it may not be acceptable to wait for 10 months for a common car, whose best appeal is cost efficiency," an industry official said. "Ten months is what people normally expect for a luxury car. The company may lose a good opportunity because of its failure to expect the demand."
Hyundai Motor also said it did not expect this explosive response, adding it had to be conservative in predicting the car's demand given the size of the segment in the domestic market.
"Last year, 54,000 full-size SUVs were sold in the domestic market," a Hyundai Motor official said. "We calculated the 25,000-vehicle demand based on the data on the existing market size. And even the number was seen as a bold goal back then."
As the company set the target conservatively, its current capacity to assemble the Palisade also remains at that level. Hyundai Motor said it is trying its best to expand capacity, but this will also take time.
According to the company and its suppliers, it has two ways to increase the number of available Palisades.
One is setting up additional facilities, which are only available during the company's summer holidays, and the other is increasing the number of units produced per hour.
Hyundai Motor is manufacturing the Palisade in its Ulsan No. 4 plant, where it also produces the Starex commercial van and the Porter mini truck.
By cutting the output of the two other vehicles, it could increase the number of Palisades, but it also requires consent from the union because it involves relocating jobs.
However, the union, which has opposed many of the management's other plans, is positive on increasing output and is in negotiations with the management.
"The union is positive on the expansion of the Palisade output, and we expect the talks are going to be smooth." a union official said.
Another problem in increasing the number of Palisades is the time required by auto parts companies.
"Since auto parts companies prepare parts depending on manufacturers' orders, suppliers are also not able to respond to the increased demand that promptly," an auto parts company official said.
This is leading to a tire shortage for the deluxe version. For this, Hyundai uses 20-inch Michelin tires as original equipment, but it recently decided to also use Bridgestone 20-inch tires because of the shortage.
Hyundai Motor is in dilemma over the popularity of its Palisade full-size SUV and Nexo hydrogen car on the domestic market, as this may not lead to actual sales, industry analysts said Wednesday.
A growing number of consumers are complaining of having to wait up to 10 months before receiving their Palisade, while the government subsidy for the Nexo is running out due to higher-than-expected demand.
The analysts said Hyundai Motor's excessively "conservative" demand expectation has led to it failing to supply enough cars, raising worries that the company may lose a good opportunity to recover from its earnings slowdown.
According to industry officials, Hyundai Motor has received more than 52,000 orders for the Palisade since the SUV's launch in December. This is more than double the company's initial expectation of 25,000.
This has created an unprecedented waiting list for customers. A Seoul-based Hyundai Motor dealer said it takes at least seven months for delivery if the customer orders one now, and up to 10 months if they want a unique color option or the deluxe model.
"For customers, it may not be acceptable to wait for 10 months for a common car, whose best appeal is cost efficiency," an industry official said. "Ten months is what people normally expect for a luxury car. The company may lose a good opportunity because of its failure to expect the demand."
Hyundai Motor also said it did not expect this explosive response, adding it had to be conservative in predicting the car's demand given the size of the segment in the domestic market.
"Last year, 54,000 full-size SUVs were sold in the domestic market," a Hyundai Motor official said. "We calculated the 25,000-vehicle demand based on the data on the existing market size. And even the number was seen as a bold goal back then."
As the company set the target conservatively, its current capacity to assemble the Palisade also remains at that level. Hyundai Motor said it is trying its best to expand capacity, but this will also take time.
According to the company and its suppliers, it has two ways to increase the number of available Palisades.
One is setting up additional facilities, which are only available during the company's summer holidays, and the other is increasing the number of units produced per hour.
Hyundai Motor is manufacturing the Palisade in its Ulsan No. 4 plant, where it also produces the Starex commercial van and the Porter mini truck.
By cutting the output of the two other vehicles, it could increase the number of Palisades, but it also requires consent from the union because it involves relocating jobs.
However, the union, which has opposed many of the management's other plans, is positive on increasing output and is in negotiations with the management.
"The union is positive on the expansion of the Palisade output, and we expect the talks are going to be smooth." a union official said.
Another problem in increasing the number of Palisades is the time required by auto parts companies.
"Since auto parts companies prepare parts depending on manufacturers' orders, suppliers are also not able to respond to the increased demand that promptly," an auto parts company official said.
This is leading to a tire shortage for the deluxe version. For this, Hyundai uses 20-inch Michelin tires as original equipment, but it recently decided to also use Bridgestone 20-inch tires because of the shortage.
