Hyundai Overwhelmed by Initial Veracruz Sales

Hyundai’s U.S. operation is learning that premium SUV buyers would rather paya little more for a lot more luxury, which is why the company is being overwhelmed by the initial take rate on its priciest Veracruz Limited model.

“We underestimated demand for the premium trim level on the Veracruz,” said John Krafcik, product development chief for Hyundai North America told Automotive News in an interview, adding that dealers are experiencing shortages of the new model.

The Veracruz, which just went head-to-head with Lexus RX 350 in a comparison review as seen in this month’s Motor Trend magazine (somebody had to do it), and won, is obviously targeting the best-selling benchmark luxury SUV, and together with the Azera luxury sedan is changing the buyers perceive a brand best known for value and a superb warranty (the powertrain warranty runs for 10 years, 160,000 miles).

Prices for the Veracruz start under $27,000 and range to approximately $38,000 for the top-line Limited model.

“It’s that one that has been the hardest to get,” continuedKrafcik, adding that the demand for its priciest model is “a good sign” for the Korean brand’s strategy for changing peoples’ perception about Hyundai.

Hyundai’s been on a rapid growth rate through the last two decades, but recent competition in the lowest end of the market resulted in relatively flat sales during 2006 at 455,000 vehicles, according to Automotive News, representing about 3 percent of the American market. Still, Krafcik maintains the company will achieve its 2007 full-year sales target of 500,000 units, despite sales being off by 1 percent in May, a dip that followed the entire car market.

The Azera and Veracruz, while not capable of achieving the high sales numbers of the brand’s Accent, Elantra and Sonata models, not to mention Tucson and Santa Fe, are critical to the profitability of both the manufacturer and dealer, while also helping Hyundai to achieve its overall sales goals, so success in with the new model is certainly positive overall.

Krafcik told Automotive News that Hyundai should sellbetween 1,400 and 1,500 Veracruz crossovers in June, even before its ad campaign begins, which like the Sonata and Santa Fe segments that compare each model to premium European imports, will pit the new CUV against the RX 350. Since April, when it launched, Hyundai’s U.S. division has sold more than 1,900 Veracruz’s.

The success Hyundai is enjoying with its fully-loaded Veracruz Limited bodes well for its next luxury entry, the much talked about full-size, V8-powered, rear-drive premium sedan said to closely resemble the Genesis concept that stole attention at the New York auto show.

It is interesting how consumer bias is changing towards Hyundai, much faster and more thoroughly, it seems, than Chrysler experienced with its push up market in the same segment with the Pacifica. The Pacifica’s price was considered too high for the Chrysler brand to carry, and therefore has steadily been brought into check via discounts and incentives. On the contrary, Hyundai hasn’t forgotten that extremely good value has to be part of its overall package, and in the case of its latest offerings, shocking and awing customers with high quality and top-tier features doesn’t hurt either.