• Apr 13th 2009 at 4:30PM
  • 27
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.

[Source: Automotive News - subs. req'd]

I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.

    • 1 Second Ago
      • 6 Years Ago
      As the article says, it's a double-edged sword... It's gives temporary relieve for H/K, yet it would pay them back seriously with the horrible resale value: P

      By the way, 35% is wayy to much...
        • 6 Years Ago
        n8new, the reason why a fleet sale doesn't mean as much is because a) it usually hurts resale value and b) sales to rental fleets are so heavily discounted that most times the company doesn't make a profit on the car. It's used as a way to get rid of excess inventory, not as a way to make money
        • 6 Years Ago
        Resale values I understand. However, I'm still not in 100% agreement with the statement "historically-abused method to inflate numbers, an inaccurate reflection of actual showroom traffic." A unit sold is a unit sold, no matter who buys it.

        If *new rock star* walks in the Cadillac dealership and buys 3 Escalades, is that considered an "inflated number?" (3 are ACTUALLY purchased.) Or is it considered an "inaccurate reflection of actual showroom traffic?" (Is each customer limited to 1 purchase?) And doesn't the fleet buyer always have the option of choosing something else -- even if it may not come at a fleet discount? The "fleet queens" so many of you deride apparently are the first choice of some fleet customers, even with the option of choosing something else. They choose them for a reason.

        By the way, resale value is PERCEIVED value that is only useful to someone who doesn't plan to keep their vehicle until is of value only to THEM anyway. And in this environment of hard-to-obtain credit and overpriced models with 7+ year mini-mortgages, holding on to vehicles until you're FORCED to buy another one will become more common.
        • 6 Years Ago
        alex - In my comment, I think I addressed my understanding of the points you make in your comment. Thanks. But still, a unit sold is a unit sold, no matter who buys it with whatever discounts. How, then, can a fleet sale be accurately described as "inflating" the number sold? (Fleet sales ARE actual sales.)

        Or how can it be it be considered an "inaccurate reflection of showroom traffic" when no customer is limited to the number of vehicles they can buy? If you were a dealer and one customer offered to buy your current stock, how would YOU view it? Me: "BRING ON that inaccurate reflection of showroom traffic" is what I would yell as we popped the cork on the champagne bottle!
      • 6 Years Ago
      Something I noticed a couple years back while working for Enterprise is that GM and Ford were pulling out of fleet sales (by a large percentage) while Toyota/Hyundai/Kia/Nissan were literally pouring cars into rental fleets. I'd say in the last years that I worked for ERAC (All of '07 and first quarter of '08) well over 50% of the new car stock we recieved were from those 4 companies. Chrysler was dumping a ton of poorly-equipped trucks and Sebring/Avengers into fleets as well.
        • 6 Years Ago
        You're correct. Ford has cut fleet sales down to a fraction of what they were just 2 years ago. They are also requiring rental customers to buy higher content vehicles. This helps negate some of the residual damage and puts people behind the wheel of a nicer product.
      • 6 Years Ago
      yep their dirty little secret. their incentives have been high too based on average transaction price.

      and they get praise for their welfare we pay for your car program..

      Here it is good old rental cars.
      • 6 Years Ago
      But I thought used car values were up in general? Isn't there a shortage of used cars? Sure their residuals will be lower because of it, but maybe not as low as yoou might expect. Seems like if you are going to do it, now is not an entirely bad time for it.
      • 6 Years Ago
      The 30% range is high for fleet sales, but it sounds like that is an average for all their vehicles, some could be much higher, others lower or none at all. For reference, I recall Toyota being talked about for having Camry fleet sales at 30% (but that was their highest fleet), the old Taurus was 100% fleet in its last year.

      You will also notice companies putting more contented vehicles into fleets (rental and other fleets). The last Hyundai I had as a rental was loaded with sunroof, Infinity sound system and "leather" that smelled like vomit... or the previous renter threw up in the back seat.
        • 6 Years Ago
        i think at one point hyundai was posting 30% couple of years ago as well. I assume their usual number is 15%-25%.

        and i think it's working because more people got to drive sonatas, and santa fes and they liked it. many people i know have driven many hyundai's through rental and most of them were pleasantly surprised.
      • 6 Years Ago
      If no car manufacturer sells to the fleets, then where would those companies get their inventory? Somebody has to do it.
        • 6 Years Ago
        If no automakers sell to fleets, then fleet buyers will presumably have to pay non-fleet prices. Like you say though, there'll always be an automaker who cannot resist the temptation of fleet sales.
      • 6 Years Ago
      "It will be interesting to see how the Korean sister brands will address this repercussion in the near future."

      They won't be able to address anything, they will just take it in the kazoo with depressed residual values like everybody else who gets caught in this cycle. Fleet sales are like crack for car companies.
        • 6 Years Ago
        It's not like their resale value is not already one of the worst in the market.
        • 6 Years Ago
        I guess this makes Subaru the only real winner in this sales climate
      • 6 Years Ago
      As many have said already, this amounts to a mandatory test drive for a lot of people who wouldn't have even thought about considering thinking about pondering a test drive of a Hyundai or Kia. Since these folks so forced aren't going to find stripped down cars, the chance to make a good impression is just as good as to make a bad one. Since HKAG's consideration rate has been historically low, the company has less to lose than the D3 or J3.

      And crippled resale values aren't a given. Values reflect how many of a model are available versus how many people want or would consider one. In this economy, being the company with the most low-mileage late model cars available can work out long-term. Presumably people buying such cars are the ones who'll be closest to buying new next time, when hopefully the economy has improved, so right now's a great time to be on their radar. And if they've previously experienced one, you're more likely to be on their radar.

      So while this is a gamble, it's not a total crapshoot. I'd imagine the US folks are under extreme pressure from Seoul to move more metal and long term, this increases their share. And as along a most of the new buyers have a better experience than with their last car or just as good an experience at a lower price than their previous ride, the majority will be back.
      • 6 Years Ago
      -more than 5000 soul sold already- Soul is the game changer for Kia
      -gen coupe will sell ALOT, 4banger just started show up in the dealer
      -forte coupe just came out, civic coupe fighter.
      -new sonata is coming soon
      -new sorrento is coming soon
      -new tucson is coming soon
      -new amanti(VG) is coming soon
      -hybrid by end of next year

      seriously, hyundai/kia growth won't stop. and every kia models are gazillion times better than the previous version. I saw 5 Kia Soul today. it's like poppin up everywhere like hampsters.

        • 6 Years Ago
        I rarely see any Korean cars around here. The closest Hyundai/Kia dealer is 60 miles away. We used to have a rather large Hyundai/Kia dealership here in town, but it did poorly, and closed a few years ago.

        I am thankful I live in a place where people still have some dignity. ;)
      • 6 Years Ago
      Hmm, I wonder if the rental companies can take them up on Hyundai Assurance, 'oops, went out of business, here you go' LOL

      Rental cars aren't always a terrible thing though, my current car wasn't even on my radar but I had to rent for a week once and it was destiny. Rentals aren't what's hurt the Big 3, if they wanted to they could've had a chance to make a good impression, but the past efforts/quality had been lacking and that's helped make the perfect storm. Read edmunds reviews and see how many are from long term car rental or fleet people, don't take them for granted
      • 6 Years Ago
      TTAC outed Hyundai/Kia as well quite awhile ago.

      As the Big Three collapse the fleet slack is going to be taken up by someone, and it's the Koreans who will be doing it. The Big Three have used fleet numbers to bolster their sales for years and years, more than one automaker can play that game.
        • 6 Years Ago
        Someone has to sell to the fleets. If the domestics won't, who will?
      • 6 Years Ago
      Everyone seems to conveniently forget that all auto manufacturers will concentrate on selling the products that make them the highest profits. They also concentrate on selling what consumers are demanding. Over the past fifteen years or so that meant full size trucks and SUVs. Why else do you think Toyota brought out the Tundra, Nissan the Titan and Honda the Ridgeline plus all the various SUVs? Why would the US brands spend R&D money on small cars when there were little or no profits in them? They made their profits and were able to support their UAW workforce by selling exactly what we the consumers wanted: big trucks. During that period it didn't matter if they sold lots of cars to fleet buyers because there was comparatively little profit in cars anyway. It also didn't matter if the quality of those cars was not so great because, again, consumers wanted trucks anyway and it was and still is difficult to make profits on small cars especially when the competition has advantages like labor and monetary exchange rates. Don't be surprised when you see some of the new small cars being sold by the domestics coming from countries like Turkey, Mexico and South Africa. They have no other choice if they want to make profits on those cars. Hopefully as the UAW realizes that they must change or die what is left of the domestic brands will be able to shift that production back to the US.
    • Load More Comments
    Share This Photo X