Hyundai follows Porsche at Nuerburgring to appeal to Europe

A Hyundai emblem is displayed at the Philadelphia A Hyundai emblem is displayed at the Philadelphia Auto Show in Philadelphia. (Jan. 18, 2013) Photo Credit: AP

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Hyundai Motor Co. is planning to measure itself on a German race track known as Green Hell that has long been a proving ground for the likes of Porsche and Mercedes. The goal: To make cars better suited to European drivers as sales in the region look set to slow.

The Korean carmaker, which along with its Kia Motors Corp. affiliate was the fastest-growing major auto group in Europe last year, is building a 5.5 million-euro ($7.4 million) research center at Nuerburgring, a test track used for racing icons likePorsches high-performance cars and the Mercedes-Benz W25 Silver Arrow from the 1930s.

The facility has direct access to the tree-lined track, dubbed Green Hell by racing legend Jackie Stewart. The 3,050- square-meter (33,000 sq. foot) center is geared toward helping engineers refine handling for European tastes. The expansion is part of an effort by Hyundai to fend off a renewed challenge by Renault SA, Fiat SpA and General Motors Co.s Opel.

It will become increasingly difficult for Hyundai to keep up the pace of expansion in Europe, said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt. The risks are growing as rivals introduce new vehicles.

Hyundai and Kia sales surged 12 percent in Europes slumping market last year, winning a combined share of 6.2 percent with a proven formula of low prices and long warranties. Its similar to the strategy Toyota Motor Corp. used last decade beforeits growth in the region plateaued on recalls and a lack of broader appeal. The Japanese carmakers share fell to 4.3 percent last year from 5.4 percent in 2007, according to trade group ACEA.

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Stronger Won

With industrywide demand likely to fall in 2013, Hyundai aims to maintain its share before growing again next year, Allan Rushforth, the chief operating officer of Hyundais European unit said in his office outside Frankfurt.

As the pace of model introductions slows, though, Hyundai expects European sales of its namesake brand to drop 6.5 percent to 415,000 cars in 2013. That would be the automakers first annual sales decline in the region since 2008.

The slowdown in the region is part of a global trend for the Seoul-based company, which is being hobbled by the strengthening Korean won. The group target of a 4.1 percent increase in 2013 worldwide deliveries would be the slowest growth rate inseven years. Hyundais stock has declined 21 percent since hitting a 52-week high last May.

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Mokka SUV

A break after years of European expansion puts the focus on further shoring up Hyundais image to encourage repeat buyers, especially as European brands respond, Rushforth said. Renault last year refreshed the Clio compact and its budget Dacia Logan.Fiat expanded with the 500L wagon. Opel is rolling out the Adam city car and Mokka compact SUV.

Almost 13 percent of Hyundais customers in Europe last year came from GMs European unit, 11 percent from Ford Motor Co. and 8 percent from Renault, the Korean company says.

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Hyundai will seek to keep its rivals at bay with a larger version of the Santa Fe sport-utility vehicle. The Grand Santa Fe will feature seven seats to compete with people movers like Fords S-Max and the Renault Espace. The car, to debut at theGeneva Motor Show in March, is expected to hit showrooms in the second half of 2013.

A new generation of the i10 mini car is also due in the second half, too late to do much for full-year sales. IHS Automotive expects Hyundai to miss its target, with sales falling to 377,600 Hyundai cars this year as Renault, Opel and Toyota postgains.

Deep Breath

Toyotas experience shows that you cant keep growing all the time, said Peter Schumann, who started selling Hyundais at his dealership in Saarbruecken, Germany, 22 years ago. After enormous expansion in recent years, many dealers need to take adeep breath.

The groups interest in European styling is evident in the promotion of German-born Peter Schreyer to head design for both brands. Schreyer, 59, a star since the 1990s for work such as Volkswagen AGs New Beetle and the Audi TT coupe, got the jobJan. 13, two weeks after becoming one of Kias three presidents and the first non-Korean to hold the post.

Hyundai and Kia have factories in the Czech Republic, Slovakia and Turkey. The group in 2003 opened a 50 million-euro research and development center in Opels hometown of Ruesselsheim, Germany. The facility employs about 220 engineers and designersworking on projects such as diesel engines.

Hyundai sees success in Europe as key to showing it can compete with the industrys most storied brands on their own turf. The strategy to align itself with local motoring culture is behind the Nuerburgring test center, slated to open in June.

Stripping Paint

The cars weve been most successful with have been designed and developed here in Europe like the i30 hatchback, ix35 compact SUV and i40 wagon, said Europe chief Rushforth.

At the track, which dates to the 1920s, engineers at Daimler AGs Mercedes stripped the paint off the W25 the night before a 1934 race to reduce weightthe genesis of the Silver Arrow namehelping establish the brand among Europes elite.

With Nuerburgrings deep roots in racing history, Rushforth said he expects the center to significantly contribute to enhancing the perception of the Hyundai brand.

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