Compared to the severity of the coronavirus outbreak across the rest of the world, South Korea had a relatively flat curve. This meant their factories kept running when everywhere else went into quarantine, and now they’ve built too many cars.
While Hyundai’s U.S. production obviously has been shut down until early May to ensure workers maintain quarantine, the limited outbreak in South Korea meant cars produced in the company’s home market could keep on churning. Now there’s a backup in U.S. ports of Korean cars with no one to buy them, Reuters reports:
Hyundai ramped up domestic production to as much as 98% of capacity by late March, not only as the Korean market was recovering from a bad February but also because it bet on demand for Tucson SUVs and other models from U.S. customers, its biggest overseas market outside of China.
Hyundai shipped 33,990 vehicles to the United States in March, or 4.3% more from a year ago, according to company data.
While Hyundai is one of few global automakers whose production has recovered at home, its exports optimism has been dampened by the severity of the U.S. outbreak, weak consumer sentiment that battered the industry, and as rivals have quickly moved to guard their turf.
Consignments of cars shipped from South Korea are now sitting in U.S. ports, with dealers slow to take deliveries because of slumping sales and rising inventory, four people with knowledge of the matter told Reuters.
Reuters could not independently verify how many vehicles shipped by Hyundai and other auto makers are held in U.S. ports.
So what happened is, back in February, Hyundai’s South Korean factories suffered a supply shortage as China first shut down over the virus. When supply returned, the company quickly ramped up production to make up for lost time—just as the outbreak spread to major markets like Europe and the U.S.
That left no one to buy the cars Hyundai rushed to build after the supply shortage. With dealers also suffering no demand from customers and quarantine concerns of their own, there’s nowhere for the cars in the port to go. It’s all a big mess.