North American Dealers Annoyed by Hyundai's Lousy Volume Strategy

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • BigJim BigJim on Jul 04, 2017

    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.

  • Bd2 Bd2 on Jul 05, 2017

    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.

  • Lorenzo Well, it was never an off-roader, much less a military vehicle, so let the people with too much money play make believe.
  • EBFlex The best gift would have been a huge bonfire of all the fak mustangs in inventory and shutting down the factory that makes them.Heck, nobody would even have to risk life and limb starting the fire, just park em close together and wait for the super environmentally friendly EV fire to commence.
  • Varezhka Of all the countries to complain about WTO rules violation, especially that related to battery business…
  • Carson D At 1:24 AM, the voyage data recorder (VDR) stopped recording the vessel’s system data, but it was able to continue taping audio. At 1:26 AM, the VDR resumed recording vessel system data. Three minutes later, the Dali collided with the bridge. Nothing suspicious at all. Let's go get some booster shots!
  • Darren Mertz Where's the heater control? Where's the Radio control? Where the bloody speedometer?? In a menu I suppose. How safe is that??? Volvo....
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