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Hyundai boss points to improved profits despite poor NFDA dealer survey rating

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Hyundai believes the relationship with its franchised dealer network is improving on the back of strengthening profits, despite a below par showing in the latest National Franchised Dealers Association (NFDA) dealer attitude survey.

In the overall average score table, Hyundai was ranked one place off the bottom, with a 4.7-out-of-10 rating from dealers that was around half the mark of table topper Lexus’s 9.3 and almost two points lower than the sector average.

Hyundai UK managing director Ashley AndrewHyundai UK managing director Ashley Andrew, speaking exclusively to AM, said: “We have re-engineered our business and have built momentum in 2021. Our Vision 2025 strategy is to exceed 100,000 volume and more than 4% market share. Our order take is currently 2,500 per week, which is above our business plan.”

He added: “We have supported dealers in reaching their customers with our national marketing, our products offerings and with local advertising.”

Hyundai’s average selling price has risen from £14,000 to £22,000 over the past three years, as the brand transitioned away from being a small car specialist to one where the majority of its registrations (65%) are SUVs. Over the same period, alternative fuels have surged, from just 8% of sales to 48% by the end of 2021.

Protecting retailers’ investment

It has also taken action to protect residual values, reducing the volume of short-cycle cars from 15% to 5% of volume, and operating a buyback scheme to ensure most of the cars are sold through the franchised network.

“We have to protect their investment and give them the return,” said Andrew. “Network average profitability is more than £450,000 with a 2.6% return on sales. This is a sustainable profit level.”

The improvements are reflected in the NFDA survey, with Hyundai registering the biggest rise of any manufacturer over the previous survey with a score of 5.7, up from 4.1. However, it is still below the industry average score of 7.1.

Not surprisingly, Hyundai’s best mark was for its alternative fuel offering, where it scored eight points (up from 6.2 in the previous survey), ranking it ninth – although sister brand Kia came top with a score of 9.6 despite offering the same number of electric options.

Award winner: Hyundai Ioniq 5 EV hatchbackThe first car in Hyundai’s Ioniq range of electric vehicles (EV), the Ioniq 5 hatchback, was today named UK Car of the Year.

Hyundai has already announced plans to accelerate its EV line-up over the next eight years, with 11 models schedule for launch. They include three saloons, six SUVs, one light commercial vehicle and one new model type.

Andrew downplayed concerns about the impact of electric vehicles on dealers’ aftersales profits due to their fewer moving parts and no fluids.

“Dealers are entrepreneurs, and they will adapt. We expect to see them do more of the business currently done by the independents, for example tyres and exhausts,” he said. “As the product gets more technical, the expert advice from the dealer network will give them the opportunity to grow their used car business.”

New mobility, but no agency model

Hyundai will also offer new revenue opportunities with the introduction of its Mocean subscription service, which will be sold through the dealer network.

Currently being piloted in London, Mocean is a flexible subs scheme with terms from three to 24 months. The package includes insurance, roadside assistance, road tax, and maintenance and repairs at Hyundai dealers, who will receive handling fees.

Kona Electric production at Hyundai’s European Czech plantDespite positive experiences with the click to buy direct sales approach taken with the Kona Electric, Andrew ruled out following other carmakers down an agency route.

“There is no rush for us to fix or change anything with the sales success we are seeing. We have no plans to do agency contracts,” he said.

“Dealers understand their local market and stock and they have their pricing strategies. We can see how successful that can be. It’s a big step for a manufacturer to go direct – you have to be sure there is an advantage. We can’t be confident that changing the model will improve things, so we won’t do it.”

Author: Stephen Briers

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