Hyundai sales are impressive, but dealer profitability is still behind competitors

Article by Christian Andrei, on March 22, 2011

Hyundai can boast that its U.S. sales have been outpacing the industry as a whole since 2008, but in one category – dealer profitability – the carmaker is still behind its competitors. Weak used-car sales, slow traffic in the service bay and tight inventories of popular new products have stunted store profits.

That has caused some big retail groups to stay away from the franchise, even as market share has jumped from 3 percent in 2008 to 4.6 percent in 2010, owing to higher-quality, better-looking vehicles and a successful move into upscale segments.

Earl Hesterberg, CEO of dealership group Group 1 Automotive, said to Autonews that Hyundai, for all its success, is "not yet a good business equation for dealers." U.S. sales exec Dave Zuchowski said the average profit for Hyundai dealers stood at 1.9 percent of sales in 2010.

According to Kansas consulting firm NCM Associates Inc., that’s up from 1.2 percent in 2009 and 0.8 percent in 2008, but is still lower than profits for Toyota, Honda, Ford, Chevrolet and Kia dealers. In 2010, dealer profitability for many of Hyundai's rivals surpassed 3 percent.

Hyundai is now nearing the industry average, which the National Automobile Dealers Association says was 2.1 percent in 2010. However, Zuchowski acknowledges that Hyundai trails rival Honda and Toyota, adding that the company’s goal is to be “in the very top of the non-premium makes.”

Topics: hyundai, sales, dealer

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