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Hyundai tells dealers to prepare for the tough months ahead

Hyundai UK is advising its dealers to make the most out of the first six months of the year in preparation of what will be a difficult second half that will lead to the brand losing hard won market share.

The warning came from Tony Whitehorn, managing director of Hyundai UK, who told AM sales would inevitably slip slightly due to the end of scrappage.

The brand doubled new car sales in 2009 to 57,000 but is expecting a 4,000 unit drop off this year due to the slow down in the new car market.

In order to try and maintain the pace the business saw last year, it has launched its own version of the scrappage scheme called Trade and Upgrade which offers the same terms as the Government scheme but includes cars from seven-years-old.

Whitehorn is expecting 6,000 customers to take advantage of this deal before the end of March. It’s also possible this could be extended beyond that.

Average dealer profitability is at 2.3% return on sales and it’s expected this will continue at least for the first six months of this year.

Whitethorn said: “We’ve got pent up demand because of the scrappage scheme so there’s actually 9,000 orders that we need to fill going into this year which gives us a solid start.

“The sales we did last year will also bring customers back into our garages for the second half of this year, which is when it’s going to be very difficult.

“Whatever dealers make in the first six months, they’ve got to try and hold on to.”

Hyundai also launched its Happy Returns initiative which allows scrappage scheme customers to trade their one year-old car for a new one for £499.

The idea behind it is to pump quality used stock back into the network, but the scheme is only likely to generate 500 sales and therefore 500 units of stock.

Network growth

Hyundai’s dealer network is currently at 144 sites and there is an ambition to grow this to 165 by 2012.

Whitehorn said: “We have our single site dealers but dual franchising has worked really well for us.

“We are often added on to a more mainstream brand that brings in natural footfall for us.”

Fleet on the agenda

Whitehorn’s long-term plans for the brand include continuing to expand the product portfolio, including more aspirational models, so dealers can have a full range of products to offer to a wider audience.

That includes fleets, which hasn’t been one of Hyundai’s strong points. Whitehorn isn’t expecting to become a big player in fleet overnight and knows there has to be the right products before pushing forward.

The outdated Sonata and Matrix are getting replaced next year and the new ix35 crossover (see road tests for more) is Hyundai’s first real foray into the fleet market.

The new model comes with Hyundai’s new 555 deal which offers five years' warranty, five years' roadside assistance and five years' free vehicle health check (one free check a year).

That particular deal is only being offered on the ix35 model as a pilot to tempt fleet and cost-conscious buyers, but if it’s successful it could be expanded to the entire Hyundai range.

The i40 saloon will be Hyundai’s headline offensive to try and push the brand’s corporate presence in the near future.

The new D-segment saloon will help dealers compete against the Ford Mondeo and will come as an estate first in February 2011 and a saloon shortly after that.

Whitehorn said: “We’re currently sitting at a 90% retail 10% fleet split and if you want to be a top 10 player you really need to get that to 60/40.

“I’m sceptical of going out and appointing corporate dealers right now. I think dealers have to want it and be dedicated to that area of the industry to make it work.”

Hyundai actually started to trial corporate dealers last year but pulled the plug because of the lack of the right product and the explosion of new car sales due to the scrappage scheme.

He said: “If a dealer comes to us wanting to do more fleet business we’ll support them with that decision. A good example is Benfield Motor Group which is doing some good fleet business for us.”

 

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