Hyundai expects third-generation Tucson to help brand raise market share in US

Hyundai is currently rolling out its all-new 2016 model-year Tucson C-segment sport utility vehicle (SUV) in the United States, and IHS recently was invited, with automotive media, to drive the vehicle and learn about the automaker's strategy and target for this segment.

This third-generation Tucson was developed as a shortened version of the Sonata sedan, according to the manager of US product planning, Trevor Lai, while previous generations were related to the Elantra range. Among the benefits of the platform change is a more composed on-road feel, increased space, stronger performance, and a new engine line-up. In addition, Hyundai describes the suspension as "reimagined".

In the 2016 model-year Tucson, the previous-generation's 2.4-litre engine has been dropped in favour of a new 175-hp, 1.6-litre unit and 7-speed dual-clutch transmission for most trim levels, though the SE retains a 164-hp, 2.0-litre unit and 6-speed automatic. The new powertrain provides improved torque and acceleration, though its overall power rating is below that of the outgoing 2.4-litre's 182 hp. During our test drive, we found the powertrain to be nicely matched for the driving situations encountered.

However, the Tucson is not really about powertrain performance. As the US market is seeing buyers gravitate to SUVs in increasing numbers, having the updated Tucson in showrooms is more critical, as Hyundai sees it has been missing opportunities with the capacity-constrained second-generation model. Hyundai Motor America (HMA) CEO Dave Zuchowski told us that the automaker's current crossover utility vehicle (CUV) registrations are down 14.5% through June 2015, describing the cause of the problem as its high car sales mix deterring people from considering heading to a Hyundai dealer, assuming it is a car-heavy manufacturer. Additionally, Zuchowski said the company has had constrained vehicle production, while a proliferation of new models within the industry is attracting consumers' attention away from the Tucson. The Tucson's sales have been relatively flat since 2011, with a dip in 2013, while the segment's sales volume has increased. Zuchowski said that, as a result, Hyundai's share of the segment, as defined by the automaker, fell from 4.5% in 2011 to 2.7% in 2014 and is expected to be 2.5% in 2015.

Hyundai's Tucson joins the Santa Fe and Santa Fe Sport with an all-new, more stylish and larger version, creating a three-SUV line-up. Additionally, HMA has been promised more volume for the Tucson, from 45,000 units per annum (upa) for the first two generations to 90,000 upa. Hyundai's production of the Tucson at its Czech Republic assembly plant will satisfy demand in Europe and the Middle East, freeing up production at the Ulsan assembly plant for the US market, according to Lai and Zuchowski. This extra capacity is critical if Hyundai wants to increase the Tucson's sales in the US.

Mike O'Brien, vice-president of corporate and product planning, said he expects the updated Tucson's competitors to include the Toyota RAV4, Honda CR-V, Nissan Rogue, Ford Escape, Mazda CX-5, and Jeep Cherokee. While the updated Tucson approaches the size of some of these competitors, it has a shorter overall length. At the same time, it is larger and more expensive than the B-segment SUVs. The Tucson has a 176.2-inch overall length and a wheelbase of 105.1 inches.

Hyundai has made this generation of the Tucson larger and more efficient, and given it more standard and optional equipment, as with the ongoing model entries of most automakers. The company wanted Tucson to project a bold, confident and athletic personality, and the updated vehicle does just that. On the road, it looks engaged and dynamic, and the LED lighting plays into the current expressions of premium. Hyundai was also expecting the car to deliver a sophisticated driving experience. Moving to a new platform enabled a significant update to the suspension, as well as the new engine and 7-speed dual-clutch transmission. Additionally, the company developed the body with 51% advanced high-strength steel for improved rigidity and ride quality. Along the route of the test drive, we experienced a variety of road surfaces and conditions, and the Tucson performed admirably, with the cabin offering a much quieter environment than expected in the class.

Hyundai has talked in previous presentations about delivering "intelligent use of technology" to provide safety and convenience. In the Tucson, Hyundai makes available several advanced driver aid systems, as these migrate quickly from premium or luxury to mainstream markets. The Tucson offers a hands-free smart liftgate with an adjustable height setting - it opens if you have the key and are standing behind the vehicle for more than three seconds, compared with Ford's system, which engages the power liftgate through a motion sensor. Lane departure warning, blind-spot detection, and parking sensors are available, though some features require stepping up to a USD342,650 model, so the Tucson is competitive and allows bragging rights on the technology. Hyundai also expects the Limited trim levels (USD29,900-34,040) to have a take rate of about 40% in the first year, relatively rich for the first year, with 35% of owners selecting the middle Eco and Sport trim levels (USD24,150-27,550) and 25% taking the basic SE and SE Popular trims (USD22,700-24,850). Those SE trims are the only points at which the 2.0-litre engine is available; the 1.6-litre powers all other Tucsons. While the base Tucson carries a price point of USD1,550 more than the base Sonata, the top Tucson trim level is only USD525 more than a Sonata, at least at the time of writing. Given the current US appetite for CUVs, it is curious that Hyundai has the upper ranges of the Tucson's price point so near the Sonata's. At best, it encourages cannibalisation of the Sonata. At worst, Tucson may not capture all of the value that it could. On pricing, Zuchowski said the Tucson needs to have a price point that is competitive for the segment, and offers the Hyundai value of delivering more than expected.

An impressive area is the overall interior fit and finish. Hyundai has been generous in its use of soft-touch materials and leather, including soft-touch and padded inside knee bolster and an up-level leather for all Tucson steering wheels. Product planner Lai told us that HMA believed it was important to ensure that everything a driver touches is a positive touch point, and the steering wheel is something used every time someone drives the car. Hyundai has made available heated front and rear leather seats, cooled front seats, and added a premium instrument panel with a 4.2-inch colour LCD cluster, and an 8-inch touchscreen navigation system.

Outlook and implications

The new Hyundai Tucson is an attractive update to the overall SUV landscape, segmentation aside. Powertrain and pricing are competitive and the segment remains poised for growth. According to the IHS Automotive forecast, the Tucson's increased availability will be rewarded with US sales growth from 32,442 units in 2014 to nearly 74,000 units in 2017; adding in sales in Canada, volumes are forecast to exceed 90,000 units in 2017.

Hyundai has increased the available driver assist systems on the model, but perhaps more importantly, has provided a significant update to the interior in terms of quality and workmanship, as well as strategically located highly-used cubby holes and buttons.

Since 2005, Hyundai has seen the Tucson's sales reach 72,504 units in North America. While the company will squeeze out a bit of extra production in 2015 to support the new car, IHS Automotive sees US volumes being below 90,000 units, though sales are expected to increase from 8% of the brand's US sales to 10% in 2015. With the sales increases, the new model may be able to help increase Hyundai's share of market - depending on which market. Among the complications of the SUV markets is narrowing down an agreed competitive set.

North American volume overall is forecast to reach nearly 95,000 units in 2017 - and slip back afterwards as the market cools. Global volumes for Tucson are forecast to reach more than 526,000 units in 2017, and North America is expected to account for about 18% of the SUV's global sales. Both Europe and China will provide higher sales volumes for the Tucson than the US from 2015 onwards.