By on July 3, 2017

2017 Hyundai Tucson - Image: Hyundai

Since 2009, Hyundai’s North American volume has seen record sales every single year. While the last few annual assessments haven’t resulted in the same volume boom as the immediate post-recession years, the company hasn’t seen any shrinkage — despite below-average incentive spending and a lineup that doesn’t exactly sync with the region’s evolving automotive tastes. Hyundai dealers are probably singing the brand’s praises and getting its logo tattooed on their staff then, right?

Not quite. While Hyundai has achieved nearly a decade of growth in the Wild West, dealers are growing increasingly disappointed with its tactics and are less than enthused about future business prospects — especially as it doesn’t appear Hyundai has any interest in scaling back car volume for the sake of SUV sales.

In fact, while both the Hyundai Elantra and Sonata remain higher-volume models, both have undergone a noticeable delivery decrease since 2012. Meanwhile, sales of utility vehicles like the Santa Fe and Tucson have nearly doubled in the same timeframe. Hyundai put 62,817 Tucson SUVs onto North American roads in 2012, and that figure rose to 113,502 last year. It could have been more, had the company been better at supplying those vehicles. 

Over a quarter of all Hyundai’s total volume can be attributed to fleet sales — accounting for roughly 203,826 total units and a 15 percent increase from 2015. Taking that into account, the brand’s previous year of record-breaking sales suddenly looks substantially less impressive. When taking into consideration the number of new registrations filed in 2016, Hyundai only had an increase of 316 vehicles. That’s little better than breaking even.

Hyundai isn’t just selling fleet cars to rental companies, however. Dealers are also getting stuck with them as loaner vehicles, something the corporate offices have been pushing hard. In some respects, these service rental cars (SRCs) were likely welcome as the brand suffered above-average recalls for 2016. But dealerships have reported being urged to take on loaner vehicles in order to meet monthly sales quotas set by headquarters in South Korea since 2013.

According to dealers, anytime Hyundai Motor America approached its end of the month quota, regional reps would begin contacting dealers to see if they were willing to purchase additional service rental cars. While plenty refused, some admitted accepting the extra vehicles as a sign of good faith.

From Automotive News:

One dealer who asked not to be identified recounted the last day of one month when a regional sales representative entered a handful of SRCs into the records as having been sold by that dealer, without the dealer’s knowledge. When the dealer confronted the rep about it the next day, the rep reversed the sales in the system, but by then they had counted toward Hyundai’s monthly goal.

Such practices may explain why Hyundai Motor America reported single-digit gains in vehicle sales for some months in 2016 — just eight units in June, and three units in August — people familiar with Hyundai’s sales operations say.

Hyundai claims the practice is standard among automakers and specified that any discrepancy between volume and registration is a result of gaps in timing between when sales are recorded and vehicles are registered.

However, with Hyundai’s global headquarters unwilling to scale back car production to bolster SUV volume in North America, SRCs are good way to move sedans. But this isn’t what dealers want and it certainly isn’t encouraging for the future of their operations. “We are going to continue the message to the powers that be that the overproduction of vehicles in the wrong segments is really affecting our ability to grow the brand and the brand value,” Andrew DiFeo, chairman of the Hyundai National Dealer Council, told Automotive News.

DiFeo specified that dealers want the company to sale back fleet sales to around 10 percent, regardless of how it has to accomplish it. “When you start getting over 20 percent and the levels that Hyundai has been at, it’s unhealthy for the long-term brand value,” he said.

So far, 2017 has seen increased incentive spending and shrinking passenger and fleet sales. While that’s not uncommon for any automotive company as the market sours, Hyundai saw a 4.8-percent decrease in volume through May — largely because of diminishing fleet demand and lackluster consumer interest in sedans.

If only there was some way to bolster sales of a specific segment the North American market is still clamoring for.

[Image: Hyundai]

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16 Comments on “North American Dealers Annoyed by Hyundai’s Lousy Volume Strategy...”


  • avatar
    Truckducken

    Re North American leadership: The firings will continue until morale improves.

  • avatar
    dwford

    While it seems bad now, it used to be much, much worse. I started selling Hyundais in 2008, through the cash for clunkers etc. We could just never get SUVs, especially Tucsons. It was that way until I quit Hyundai in 2015. Now when you go to the dealers, you see rows of Tucsons and Santa Fes, I couldn’t even fantasize of having that many back in the day. Hyundai also never had competitive leases back then. They really only wanted to sell Elantras and and Sonatas, all rebates and lease offers favored those 2 models, everything else was wildly uncompetitive. It is so much better now. Still, Hyundai was very slow about getting a smaller CUV to the market, when they could’ve had the ix25 here 3 years ago. And their crossovers still lack the luxury feel you can get in many other brands.

    Hyundai really botched the redesigns of the Sonata and Elantra. When the last generation came out in 2011, we were selling those cars as fast as we could with only $500 rebates and expensive leases. Now they are giving them away.

    • 0 avatar
      Raevox

      While the redesign of the Sontata was less than exciting (which explains their more aggressive refresh for 2018), I would STRONGLY argue that the Elantra redesign was in no way, botched. While it looks less interesting than the MD generation, the AD is an overall much more handsome car. It is also a pretty quiet and solid car, even with the larger 18″ wheels on the Sport.

      Many auto pubs have good things to say about it’s design, there’s many good reviews of the Sport (with even commentariats here at TTAC and Jalopnik realizing it’s an underdog that deserves credit). It’s simply come to a market canted towards non-cars. The Elantra had fewer incentives last year, up to Q1 this year. In fact I kind of wish I had waited another 2 months or so to grab another grand off what I paid.

      The 2018 Elantra GT is on the new i30 platform. The 2017 was still previous generation, and is on the verge of release.

      They are giving Sonatas away to spur sales and clear inventory for the 2018.

      • 0 avatar
        dwford

        They just took the style away from the Elantra both inside and out. But they kept the cheap interior materials, definitely a step backward. The current Elantra GT is my favorite Hyundai design ever, and I have a strong hatred for the new one. Everything about its style inside and out is a step backwards as far as I am concerned.

      • 0 avatar
        Kyree S. Williams

        I agree. I think Hyundai did an excellent job of moving the Elantra’s design in a more mature, formal direction without losing too many of the swoopy lines.

        And the materials were improved considerably. They’re not top-of-class by any means, but definitely better than those in the old one.

  • avatar
    EX35

    Could it be that consumers have wised up and realized hyundais are no longer the bargain they once were? Having rented a Santa Fe and sonata in the past 6 months I can easily say they are not as good as their Toyota/Honda counterparts.

    • 0 avatar
      Carrera

      Agreed EX 35. I will be in the market for 3 row SUV for the wife within 6 months. I thought the Santa Fe will be a contender for the Pilot. I was very underwhelmed by the test drive. The V6 seemed weak and slow. The inside looked very drab. And the test drive was done on a SE with leather so not exactly a stripper. The CX9, the Explorer and even the new VW look nicer inside.

    • 0 avatar
      dwford

      They aren’t the bargain they used to be, and Hyundai has been decontenting (removing the panoramic roof from the Sonata and Elantra, etc.). These days you can get a better level of equipment on a Kia than the equivalent Hyundai.

    • 0 avatar
      brn

      Hyundia never was a bargain. Kia was. Kia gave you a, solid, basic vehicle at a good price. Kia then increased the feature set of their vehicles and brought the price up to match. No advantage over the competition, just automotive journalist love.

  • avatar
    eggsalad

    Around here, they are practically giving away Sonatas & Elantras.

    The Accents are piling up on the lots because you can get an Elantra cheaper.

  • avatar
    tobiasfunkemd

    i bought a new Tucson about two weeks ago, after cross-shopping the CR-V, RAV-4, Escape, and CX-5. I wouldn’t say the Tucson led the pack in any category, but it held its own, especially the 2.0 without the DCT. The interior wasn’t atrocious, the tech worked, and the seats were comfortable. They were also willing to deal, which is a rarity for SUV makers that aren’t tainted with the FCA association or desperately riding a fifth year without a refresh (Escape). I was BLOWN AWAY at how many sedans were on the lot – clearly it’s been a fight to move those off the lot. Tellingly, the four display vehicles inside the showroom were the three SUV lines and the Genesis – not an Elantra, Azera, or Accent to be seen. The dealers know what people walk on the lot to see.

    • 0 avatar
      threeer

      Kind of reminds me of the BMW dealership back home…drove by a few weeks ago and the front row outside was X1/3/5. Not a 3-series to be seen up front. Not. One. Jaguar is sold by the same dealer and the same thing there…SUVs, baby.

      Kind of sad with Hyundai. If I was in the market for a fun, underrated four door, I’d be all over the Elantra Sport. I actually would love to test drive one when I get back home in a few months, even if I’m nowhere near in the market for one.

  • avatar
    87 Morgan

    20% Fleet is bad news and my money says when you back the SUV’s out the fleet number is way higher, as in of the cars sold 45% went fleet.
    Where could you find the break down of which model were sold retail vs fleet. I am guessing the SUV’s stayed with the dealers as they are actually a salable product right now.

    If the bulk of the fleet sales are cars, than whoever bought a car this month new is hose in a year or two if they want out

  • avatar
    tallguy130

    I still say a large part of their problem is simply showing up late to the CUV party. Not having competitive players in that space till just recently are bringing down foot traffic.

    That and cars overall are on a downward trend. Coupled with the Sonata being rather forgettable (not terrible but meh) and you got the current situation.

  • avatar
    BigJim

    Hyundai’s lack of SUV product is largely of their own doing. They had an excellent 3 row vehicle in the Veracruz, which was vastly superior to the current Santa Fe in terms of room, comfort and appointments. But in it’s 6 year run Hyundai made zero updates, not even a grill or taillight refresh. It’s now 6 years late with a viable replacement. I gave up waiting for them to fill this void years ago.

  • avatar
    bd2

    Really poor planning from about 2010 – not just in moving so slow in adding more CUV models, but not adding enough supply of the CUV models it did have in its lineup.

    Not that the previous Tucson was anything great, but it sold so much less than the competition due to the lack of supply for the US market.

    With the move to the current Tucson, Hyundai had the opportunity to up production to better meet US demand, but while supplies were increased (selling from nearly 50k for the previous model to being on pace to sell over 100k for the year), still not enough (Honda can produce over 350k CR-Vs a year; the Tucson is closer in sales to the HR-V).

    Hyundai probably could sell 150k Tucsons this year is they had them.

    The addition of the subcompact Kona to the lineup should help, but that should have been done years ago.

    But Hyundai opted to prioritize the China market (which bit them in the rear) and developed a subcompact CUV for China (Creta) before developing one for NA and Europe.

    Also was a bad move going for the liftback body-style for its hybrid/PHEV/EV model when Kia (at the insistence of its US division) went with the crossover body-style and Niro handily outsells the Ioniq not only in the US, but Korea and Europe as well.

    Also been really slow in greenlighting the Santa Cruz pick-up.

    Going to be a few years of hurt before Hyundai will have the product lineup to start turning things around.

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