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Hyundai sets plan to boost retail network

Hyundai is looking to exploit the brand’s ongoing sales momentum – up 32% last year, up another 33% in the first quarter of this year – by attracting more retailers to the franchise and encouraging further investment by the existing network.
It wants to boost network numbers by 16 this year, taking it to 180: that’s on top of adding 29 dealers in 2003. And it wants to “enrich the quality of the network”, according to UK managing director David Walker. “We want dealers who are ambitious and there’s a lot of interest in the franchise,” he adds.

Hyundai is looking to hit 37,000 sales this year (2003: 32,238) and has quickly identified the revised block exemption regulations as a way to bring on board larger businesses.

“We need to move forward the professionalism of the network and that tends to come from experience with other franchises,” says Walker. “We have many owner-drivers who do an excellent job: we need to complement them with dealers who can sell 250 new cars a year. At present our dealers average 173 each, so they need to increase their capacity to realise our growth ambitions. Inevitably that will mean looking at regional and larger dealer groups and we are in talks with several that have shown an interest.”

Werner Frey, Hyundai Motor European vice-president, outlines the potential with even greater clarity. “By 2010 we want to have 500,000-600,000 sales in Europe. The UK’s contribution could be 60,000 units. To achieve that we need bigger groups and better quality – we must challenge them to meet our ambitions.”

And that means investment. Hyundai has been developing its network to keep pace with growth in order to minimise the burden on its retailers. It intends to stick with that policy, although accepting that investment in larger facilities – six-car showrooms will be a minimum requirement – will be essential for many dealers.

“But we haven’t set over-onerous standards under the block exemption regulations,” adds Walker. “Our existing retailers need to see a return on their investment.”

So what of the Slovakian factory being built to produce only Kias by 2006? Can Hyundai meet its ambitious growth plans in Europe without slotting in production alongside its smaller sibling? “The plant is designed to build Kias, but we share platforms and it is logical that Hyundai will have to have a plant in Europe at some point – either in Slovakia or building our own in another country,” says Frey.

He believes the two brands do need clearer differentiation and says this is a view taken at senior management level in Korea. “A Hyundai needs to look and feel like a Hyundai and a Kia like a Kia: we will have a clear market position and that will guide everyone in the business, from designers to engineers to dealers. At that point we might consider dual-franchised dealers, but not before.”

And Frey does not see any reason to follow in Kia’s footsteps by taking distribution in-house. “For the time being we see no reason to change this. The current setup works for everyone: we make money, our UK distributor makes money and our dealers make money.”

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