Hyundai/Kia is defying the bad economy? Think again...
04-13-09, 03:05 PM
#1
Hyundai/Kia is defying the bad economy? Think again...
While most automakers are reporting double-digit drops in sales each month, Hyundai and Kia continue to swim against the current and maintain (or even increase) units sold. According to Automotive News, a significant part of their success is attributable to fleet sales – large numbers of cars going directly into rental and corporate fleets. During the first quarter of 2009 alone, more than 33 percent of Hyundai's first quarter sales of 95,854 units were fleet related. Rental car sales represented nearly 35 percent of Kia's sales during the same period.
There is nothing inherently wrong with fleet sales, but many in the industry see them as a historically-abused method to inflate numbers, an inaccurate reflection of actual showroom traffic, and a potential liability for residual values. "We accept the criticism that our fleet is up," Hyundai Motor America's sales boss Dave Zuchowski said when he addressed the issue. "But our retail share also is up and outperformed the industry."
Utilized heavily by the Detroit Three in the past, fleet sales are a double-edged sword. Automakers get a strong boost in sales when the vehicles are delivered, but then pay heavy consequences with an oversaturated segment when the cars are dumped back into the used car market. It will be interesting to see how the Korean sister brands will address this repercussion in the near future.
There is nothing inherently wrong with fleet sales, but many in the industry see them as a historically-abused method to inflate numbers, an inaccurate reflection of actual showroom traffic, and a potential liability for residual values. "We accept the criticism that our fleet is up," Hyundai Motor America's sales boss Dave Zuchowski said when he addressed the issue. "But our retail share also is up and outperformed the industry."
Utilized heavily by the Detroit Three in the past, fleet sales are a double-edged sword. Automakers get a strong boost in sales when the vehicles are delivered, but then pay heavy consequences with an oversaturated segment when the cars are dumped back into the used car market. It will be interesting to see how the Korean sister brands will address this repercussion in the near future.
ffpowerLN says: 33% to 35% to the rental fleet, wow, those are the D3 kind of numbers... Well, so much for the early praise on Hyundai/Kia huh?
04-13-09, 03:15 PM
#2
Lexus Fanatic
The flip side of that arguement, though, is that the economy can't be that bad if there is that much demand for rental and corporate cars. If rental firms and corporations are placing fleet orders, it is for a reason.....they aren't doing it (like the government sometimes does) just to waste money or spend money for the sake of spending. People are apparantly renting cars and (maybe) asking for Hyundais.
04-13-09, 05:36 PM
#4
Lexus Fanatic
That's not to say that Detroit doesn't produce some nice rentals, though. The Chevy Malibu, Saturn Aura, Ford Fusion, Mercury Milan, and Lincoln MKZ are all nice sedans, and at least reasonably reliable.
Last edited by mmarshall; 04-13-09 at 05:41 PM.
04-13-09, 05:41 PM
#5
Lexus Champion
The Hyundai/Kia sales could also be driven by the normal replacement cycles in the fleets. If they are selling that high of a percentage to fleets, they no doubt are offering incentives that are helping to drive those sales.
04-13-09, 05:46 PM
#6
Lexus Fanatic
Hyundai's generally lower-than-Detroit list and wholesale prices, alone, are incentives, even apart from any other factory discounts. And you have to consider reliability as well, especially with the fact that many rentals are driven in a rather abusive manner. Hyundai's enormous increases in reliability, in the last 10 years, have made many organizations take notice that depend on their cars' reliability to stay in buisness.
04-13-09, 06:14 PM
#7
It might be that the rental companies, even aside from specific demand from customers, have seen what value and quality the Sonata, Elantra, Accent, and Santa Fe are. The also low-cost Dodge Stratus and Chrysler Sebring, long kingpins in the rental-car buisness, are, in comparison to today's Hyundais, simply junk. (I don't often use words like junk to describe vehicles, but those 2 cars, overall, IMO, are quite unimpressive)
That's not to say that Detroit doesn't produce some nice rentals, though. The Chevy Malibu, Saturn Aura, Ford Fusion, Mercury Milan, and Lincoln MKZ are all nice sedans, and at least reasonably reliable.
That's not to say that Detroit doesn't produce some nice rentals, though. The Chevy Malibu, Saturn Aura, Ford Fusion, Mercury Milan, and Lincoln MKZ are all nice sedans, and at least reasonably reliable.
Trending Topics
04-13-09, 06:34 PM
#8
Lexus Fanatic
That Chevy wasn't a new Malibu, I take it (?). That's a pretty nice car; a far cry from a lot of the junk GM has done previously; and, of course, previous Malibus.
04-13-09, 07:55 PM
#9
Lexus Champion
Join Date: Sep 2006
Location: MIchigan
Posts: 2,025
Likes: 0
Received 0 Likes
on
0 Posts
I don't see a big problem with Hyundai getting sales via fleet rentals. These sales are not going to GM, Ford or Toyota so good for Hyundai. Fleet sales keep production rolling. Many people are unaware that Toyota supplies fleet vehicles which include Camry, Corolla, Prado's, Land Cruiser 200 and in North America the Tundra.
The current Camry design is used as a taxi in many places throughout the world...the Land Cruiser is a favorite for the UN and the current Tundra can be found with some industrial companies.
Good for Hyundai...they are gaining market share.
The current Camry design is used as a taxi in many places throughout the world...the Land Cruiser is a favorite for the UN and the current Tundra can be found with some industrial companies.
Good for Hyundai...they are gaining market share.
04-13-09, 08:04 PM
#10
Lexus Test Driver
Join Date: Jul 2008
Location: CA
Posts: 1,279
Likes: 0
Received 0 Likes
on
0 Posts
Yes but with fleet sales comes a dilluted residual value, not to mention brand perceptions. There's a reason why GM and Ford are tremendously decreasing their fleet sales. It's not all about market share.
Great article.
Great article.
04-13-09, 08:18 PM
#11
Lexus Champion
I also believe that this isn't a feather in KIA/Hyundai's cap. Isn't this exactly the scenario that contributed to the demise of GMAC and Ford Lease Co?
This is likely more to do with the rental companies pinching their pennies and taking advantage of them during this difficult economic time.
04-13-09, 08:37 PM
#12
Lexus Fanatic
This is likely more to do with the rental companies pinching their pennies and taking advantage of them during this difficult economic time.
04-13-09, 08:47 PM
#13
Lexus Champion
The economic downturn certainly accelerated the process but the fleet sales and subsequent returns didn't help matters.
Last edited by CDNROCKIES; 04-13-09 at 08:52 PM.
04-13-09, 08:50 PM
#14
Lexus Fanatic
Sorry, let me clarify myself mmarshall. I wasn't suggesting that it was the vehicles themselves that were the issue (although outside of the last few years I woul say that it was a major factor). I was more pointing out that by putting so many of their eggs in one basket they were likely not doing very well financially on the fleet sales.
The economic downturn certainly accelerated the process but the fleet sales and subsequent returns didn't help matters.
The economic downturn certainly accelerated the process but the fleet sales and subsequent returns didn't help matters.
OK, fine....and I'm sorry if I misunderstood you.
