Hyundai Dealer Profits Trailing Behind Competition

Month after month, Hyundai has reported increases in sales and record breaking values. But the picture is not as rosy at it might seem at first with the company’s North American division, according to a recent Automotive News article.

The company’s sales chief, Dave Zuchowski, says that average profit at the automaker’s dealers was 1.9 percent of all sales. While that’s a healthy increase over 2009′s 1.2 percent and 2008′s less than 0.8 percent, it’s well behind its main rivals. Store profits have been stunted by slow traffic in the service bay, weak used-car sales and tight inventories for the most popular new products.

Hyundai is "not yet a good business equation for dealers," says Earl Hesterberg, CEO of delership group Group 1 Automotive.

That very lack of profitability has led some big retail groups to stay away from the franchise, even if the company’s market share has soared from 3 percent in 2008 to 4.6 percent last year, thanks to improved quality, more attractive vehicles and a successful move into upscale segments.

Dealer’s profits from Hyundai’s competitors have surpassed 3 percent last year, but the company is getting close to the industry average, which the National Automobile Dealers Association says was 2.1 percent in 2010.

"Our goal is to be in the very top of the nonpremium makes," says U.S. sales boss Dave Zuchowski. "We're not there yet, but we're making great progress."

Hesterberg agrees that the value of a Hyundai franchise is improving, “but they have little parts and service business. Traditionally they don't have a great used-car business. And they don't have enough new-car margin yet."
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About the author: Mihnea Radu
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Mihnea's favorite cars have already been built, the so-called modern classics from the '80s and '90s. He also loves local car culture from all over the world, so don't be surprised to see him getting excited about weird Japanese imports, low-rider VWs out of Germany, replicas from Russia or LS swaps down in Florida.
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