Hyundai Aims for Efficiency Lead

Car Maker May Meet U.S. Fuel Standard Five Years Early
By EVAN RAMSTADSeptember 3, 2008;

NAMYANG, South Korea -- Hyundai Motor Co. can meet the proposed U.S. fuel efficiency standard of 35 miles per gallon in the fleets of its Hyundai and Kia brands by 2015, five years ahead of a U.S. deadline, without relying heavily on hybrid vehicles, the company's research chief said Tuesday.
The declaration is a bold statement of technical confidence by the South Korean manufacturer, which has trailed behind Japanese and U.S. manufacturers in the development of fuel-sipping hybrid vehicles. It also distinguishes the company from competitors that have argued to U.S. regulators in recent weeks that an interim step in boosting fuel standards -- to 31.6 mpg by 2015 -- is too aggressive.
Hyundai will focus on building smaller cars using lighter materials as well as new engine and powertrain technologies such as gasoline direct injection, dual continuously variable valve timing and eight-speed automatic transmissions to hit the new U.S. fuel-efficiency standards, said Lee Hyun-soon, president of Hyundai's research and development division. The company is also unlikely to enter the gas-guzzling U.S. pickup-truck market, he said.
"With just conventional gasoline engines, we think we can hit 35," Mr. Lee said in an interview at company's research and test center. "We have the technology to improve fuel economy. The problem was it increased the cost of the vehicle. Now, with higher oil prices, we can justify the technology."
With gas prices soaring, Mr. Lee said consumers would be willing to pay slightly more for cars with these new, expensive technologies if the added cost is more than made up for in fuel savings. An extra $100 to $200 in cost per vehicle, he said, may be enough to boost efficiency about 10%.
"Ten percent is not small over the life of a vehicle," Mr. Lee said.
To hit the 35 mpg fleetwide target by 2015, the company is still relying, in part, on selling highly fuel-efficient hybrid vehicles. The company already has said it will sell a compact hybrid in South Korea under both the Hyundai and Kia brands next year and a midsize hybrid in the U.S. under both brands in 2010.
Hyundai said it would likely steer clear of the U.S. pickup-truck market, which it has considered entering in the past. Pickup trucks and large sport-utility vehicles consume much more fuel than passenger cars. U.S. auto makers since the early 1990s have relied heavily on sales and profits from pickups and SUVs, but that has left them in a difficult position to adapt to rising fuel-efficiency standards.
Mr. Lee said Hyundai executives will make specific decisions about pickups in coming years.
"In any case, we will not be involved in full-size, heavy-duty pickup trucks. If we need to be in the pickup market, it will be compact or smaller than midsize but with an advanced powertrain," he said. "We are watching carefully how the pickup-truck market evolves under this environment of higher gas prices."
In December, U.S. President George W. Bush signed a law that requires auto makers to boost their fleetwide gas mileage, including cars and light trucks, to an average of 35 mpg by 2020. The standard this year is 27.5 mpg for cars and 22.5 mpg for light trucks.
Since the law's passage, auto makers have tried to influence new regulations being developed by the National Highway Traffic Safety Agency, which is responsible for enforcing the new standard.
Asked whether Hyundai may be able to gain a marketing edge by meeting the 2020 target early, Mr. Lee said: "Everybody has the same homework. Maybe we are a little bit faster. Our engineers are working hard on this."