16 March 2022

In outright registrations, Hyundai saw a greater increase than any other brand in 2021 with a gain of more than 22,000 cars to a total just shy of 70,000. Its market share was 4.23% and the network average return on sales was 2.6% which equated to an average profit of £450,000 per site. Yet, for the past few years Hyundai’s retailers have consistently given the manufacturer a poor rating the NFDA’s Dealer Attitude Survey.

Things are now on the up, according to UK managing director Ashley Andrew who attributes the historically poor NFDA survey scores to a realignment of the business as it moves from one purely focused on volume to one he says concentrates on “premium volume”.

For Mr Andrew, who is a believer in the franchised retail model, this means a brand that rivals Volkswagen and Toyota. It also means a shift away from low-margin business to an increase in retail and true fleet sales. “We changed the business over the last three years, and that’s quite a short space of time to implement the change we did.

“As a brand, we’ve been very, very successful. From 2010 the brand had been very innovative in terms of scrappage, very innovative with the retailers, had grown scale, had grown presence and had grown a real market reputation and scale in the UK. My role from when I took over in 2019 was really a different remit, and it was to take the brand to premium volume, because of the electrification of the products.

“So, we did a lot of re-engineering of the business over three years. I think in 2021 though, we saw the results of those changes.” Indeed, figures out this month from the NFDA Dealer Attitude Survey reveal Hyundai was the second fastest improving brand, even if its score of 4.6 out of 10 means it’s still in the lower half of the chart.

Changing position

At the end of 2018, Hyundai’s average selling price was £14,000. At the end of 2021, it was £22,000. And, according to Mr Andrew, Hyundai had moved from being a brand selling about 65% hatchbacks, and with a high weighting toward the i10, to selling 65% SUVs with a much higher weighting of Kona and Tucson.

“At the end of 2018, 93% of what we were selling was combustion engine. At the end of 2021, we were 48% alternative fuel, with a 17% EV weighting. So it’s a big, big change over a relatively short space of time, but the fundamental change and the big difference for me about volume as opposed to premium volume approach was that we put over 92% of the volume through the network at the end of 2021. When you go back to the end of 2018, we were as much as 20% outside the network.

“And that was essential to protect the residual values, because of all the investment in the new technology.” According to Mr Andrew, the changes have had the desired impact on residual values, with Hyundai now challenging VW in percentage terms.

With retail going well, Hyundai is now looking to strengthen its true fleet position. “We’ve done a lot in terms of building our fleet business, and this is just because of our leadership and electric vehicles. We’re at a stage where a number of companies, who, on their user choose policy lists, we probably hadn’t been on those policy lists before, but we’re now getting the opportunity with Ioniq 5, with Kona Electric, with Tucson Hybrid, to go up against some of the well-established market leaders. So our end user fleet business, our true fleet business, is now strengthening.”

EV expectations

The increased proportion of EVs means Hyundai is looking to increase the minimum requirements at dealerships to handle this rise. Hyundai’s minimum charge point requirement is, at present, three 7kW points. However, the brand is looking to increase this to five 7kW points.

“I think the customer’s expectation is that, at handover, the vehicle will be fully charged. The handover process is obviously far more involved because it’s the education of how the vehicle works,” said Mr Andrew. “And then at the points of regular service, the expectations are that the vehicle comes back charged. At the moment, dealers have been more than able to accommodate and meet those expectations.”

While retailers don’t typically refuel petrol and diesel models when they’re in for a service, Mr Andrew believes that to meet customer expectations, this is what’s required.

He also believes retailers will be able to maintain aftersales profitability, as the proportion of EVs increases in the vehicle parc, through greater focus on customer retention, older car servicing and tyres.

“I think we are seeing the networks themselves very focused on making sure that they capture all the revenue opportunities. So, as the service content probably becomes less because of the weight of EV increasing, dealers, invariably, in terms of being adaptable and entrepreneurial, are going after the classic IMT business and winning that. So, it’s more of the tyres, more of the brake business, bringing MOTs in, going after the older vehicle part.

“We obviously have the five-year warranty. We focus now on the six-year-plus penetration of that vehicle part, because that’s a good opportunity. So I think, processes such as vehicle health checks will enable dealers who are very entrepreneurial and able to adapt to protect those revenue streams.”

Mr Andrew also believes subscription models will boost retailer profitability, both as a mobility solution provider and in-car purchasing. “We’ve launched our subscription model; Mocean. And as we move to clean mobility, which is core to our strategy, we will offer other omnichannel solutions and services for the customers. Subscription’s one of them, and service plans is clearly another area. And then on top of that it’s the ability to pay for upgrades, which are what we call the recurring revenue models.”

And rather than the manufacturer taking the profit here, Mr Andrew believes it will be a combination of retailer and manufacturer benefiting from these revenue streams.

Tags: Ashley Andrew, Hyundai, margin, NFDA dealer attitude survey, premium volume, profitability, RV