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Hyundai five-year warranty sharpens competitive edge

Hyundai Car (UK) will next month launch a five-year/unlimited mileage, manufacturer-backed warranty as part of a strategy to boost sales by establishing a competitive edge in the aftersales market.

Falling new car prices have eroded much of Hyundai's value advantage over rival carmakers, forcing it to consider new ways to develop the marque. The company believes the warranty, backed by a £6m TV and print ad campaign, will encourage retail buyers to “take a risk” on a brand that it readily concedes is still relatively unknown in the UK.

“We have traded on our strong value advantage but the market is becoming more competitive as manufacturers lower their prices so we need to take our brand to the next level,” says managing director David Walker. “Our research identified that customers most wanted a five-year warranty.”

The programme, jointly funded by Hyundai Car (UK) and its Korean parent company, is part of a broader strategy to take Hyundai to 40,000 sales within four years. It expects to retail 30,000 cars this year and is up on the year to July by 10.2 per cent at 17,321 units.

Fleet buyers are a vital factor in Hyundai's growth plans. The company sells around seven per cent of total volume to fleets, but needs to increase this to around 15-20 per cent to meet its targets.

“The warranty is transferable to second owners, so fleets will be able to sell cars after three years with two years' manufacturer warranty left,” says Walker. “This should increase demand for our used cars and help to improve residual values.”

He believes higher resale values will more than offset any losses caused by increased claims on high mileage and vehicle abuse over the final two years of the warranty.

Hyundai is looking to expand its dealer representation in key metropolitan areas, and is offering short-term financial support to encourage investment. This includes doubling-up in some cities.

An experiment in Edinburgh, where Hyundai appointed a second dealer, has helped to boost sales in the area. It is urging dealers to focus on aftersales, a part of the business that is expected to grow on the back of the new five-year warranty.

“We are having to push some dealers to take advantage of aftersales,” says Walker. “There will be some areas where they will have to make improvement in capacity and/or efficiency. This might include sweating the assets by extending working hours.”

Rival carmakers like Kia and Daewoo say they currently have no plans to match the Hyundai scheme, though Proton does offer a five-year/80,000-mile warranty on the Impian.

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