Sept. 27 (Bloomberg) -- Hyundai Motor Co., the fastest growing mass-market auto group in Europe, is holding off on major expansion in the region, focusing instead on lifting profits and retaining customers with growth prospects delayed by the debt crisis.
“Now is not the time to think about adding additional capacity,” European Chief Operating Officer Allan Rushforth said in an interview. “What we want to do is more efficiently and effectively use the capacity we’ve got and improve the fabric of the business to improve our margins.”
The Seoul-based carmaker postponed a target of selling 500,000 vehicles annually in Europe until next year as the sovereign-debt crisis saps demand, Rushforth said from the regional headquarters in the Frankfurt suburb of Offenbach. With growth slowing, Hyundai plans to increase advertising spending as part of an effort to boost awareness and increase loyalty as it seeks to increase market share in the region to 5 percent by 2015 from 3.4 percent now.
Hyundai and its Kia Motors Corp. affiliate have increased combined sales by 16 percent in Europe this year, compared with a 6.6 percent drop in the total market, according to ACEA, the European car industry group. Volkswagen AG’s sales edged up 0.5 percent, while PSA Peugeot Citroen, Renault SA and General Motors Co. have recorded drops of more than 10 percent.
The Korean auto group owns factories in the Czech Republic, Slovakia and Turkey. Hyundai today showed the five-door version of the i30 compact at the Paris Motor Show, and Kia presented the Pro_Cee’d, a sporty three-door variant of the Cee’d hatchback.
Even after five consecutive years of contraction, a quick turnaround in the European auto market is unlikely, said Rushforth, who expects that demand will not return to pre-crisis levels before the end of the decade.
Hyundai, which imports 10 percent of its cars sold in Europe from South Korea, has capacity for 500,000 vehicles at its plants in the Czech Republic and Turkey. It also imports vehicles made in India to the region. Hyundai is now forecasting sales of 450,000 cars this year.
“The cars we build are pretty good, but how we come to market is a bigger challenge right now,” Rushforth said, citing Volkswagen as the standard for sales and loyalty programs in the region. Last year, VW Chief Executive Officer Martin Winterkorn praised Hyundai’s i30 in a video made at the Frankfurt car show.
As part of the marketing push, Hyundai announced today that it plans to re-enter world rally racing in a bid to show that its vehicles can compete technically as well as on value, according to Rushforth. This summer, Hyundai also sponsored the European soccer championship, including outdoor viewing venues in Berlin, Paris and Madrid, to raise its profile.
“We are at a stage in our development where we have to work really hard” on improving our sales operations, especially boosting loyalty, said Rushforth, who spent seven years working for VW and its Audi luxury unit before joining Hyundai in 2007.
That’s a change in tack for Hyundai, which largely built its presence in Europe by wooing new customers with inexpensive models. Last year, 72 percent of its sales were to buyers new to the brand.
As part of the effort to encourage repeat business, Hyundai acquired its independent distributor networks in France and Germany last year to gain more control over the dealers in Europe’s two biggest markets.
Also, the Korean carmaker is expanding a 2010 tie-up with Banco Santander SA to provide car loans for buyers in the region. Hyundai already finances 39 percent of retail sales in Europe, almost double VW’s 20 percent.
“Most of our European competitors are busy working very hard at customer retention -- keeping the customers they’ve got -- and we need to do the same,” Rushforth said.
To contact the reporter on this story: Alex Webb in Frankfurt at email@example.com
To contact the editor responsible for this story: Chad Thomas at firstname.lastname@example.org