Hyundai Motors will expand its U.S. factory in hopes of increasing production of SUVs to meet demands of consumers looking for gas-guzzling vehicles, according to Reuters, citing three people "familiar with the matter."
Sales for the Elantra and Sonata are slowing down in the U.S. since car buyers are taking advantage of lower fuel prices in order to switch to bigger, less fuel-efficient vehicles.
"It's a new assembly line right next to the current Alabama line. State of Alabama is negotiating final terms," one of the sources said.
Hyundai builds its Santa Fe SUV at Kia Motors' manufacturing facilities in Georgia currently, and imports Tucson compact SUVs from Korea.
The South Korean-automaker currently makes its Elantra compact and Sonata sedans at its Alabama factory.
"Hyundai needs to build a second plant in the U.S," Korea Investment & Securities auto analyst Suh Sung-moon said.
The new Alabama plant will be able to manufacture about 300,000 vehicles and start SUV production in 2017, according to The Yonhap News Agency. There is a chance Hyundai might transfer Santa Fe production to Alabama, which may also make the Tucson and a pickup, according to Sung-moon.
This is a big deal since Hyundai doesn't sell a pickup in the U.S.
Hyundai has plans to launch an updated version of its Tucson SUV in Korea later on this month. The vehicle will be released in the U.S. and other countries later on this year.
Company sales in the U.S. rose 4.3 percent from January to February, according to Reuters. Its shares increased about 3.2 percent to their highest level in nearly two months after the news was reported by South Korea's Yonhap News Agency.
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