Hyundai and Kia seen using fleets to boost sales numbers
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]
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Reader Comments (Page 1 of 2)
Tourian 4:36PM (4/13/2009)
"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.
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chconline 5:28PM (4/13/2009)
It's not like their resale value is not already one of the worst in the market.
Bob-omb 5:31PM (4/13/2009)
"It's not like their resale value is not already one of the worst in the market."
Uh, it's not.
Mike 5:46PM (4/13/2009)
I guess this makes Subaru the only real winner in this sales climate
ack154 4:36PM (4/13/2009)
So how do their fleet numbers right now compare to the "big 3" (or any other automaker, for that matter) for the same period? That's the important question. If they're on par, percentage wise, with everyone else, I don't see it as too big of a deal. But if H/K are in the 30% and everyone else is at like 25%, then ya, sales number inflation.
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alex 5:27PM (4/13/2009)
Don't quote me on this, but i believe GM and Ford are about 25% fleet, Toyota is closer to 12-15%, and honda is about 9%. I think... it's somewhere around there
Also keep in mind that Kia edged out chrysler to be the auto company with largest average incentive per vehicle. And when you consider that all Kia's are dirt cheep to begin with, it doesn't look so pretty. (ie, a $2000 rebate on a CTS is a much much smaller % discount than a $2000 rebate on a Rio.)
Len_A 7:48PM (4/13/2009)
Alex, I think you're correct on your numbers.
XJ 9:48PM (4/13/2009)
Yes, Hyundai inflated their numbers with increase in fleet sales, but not as much as you might think. Theautochannel.com reports that Hyundai's fleet sales were up 32% from a year ago. That equates to an extra 7,668 vehicles sold to fleets in Jan-Mar 2009 vs Jan-Mar 2008. Here are the numbers...
2009 Q1 total = 95,854
2009 Q1 total x 33% to fleets = 31,632
That means 31,632 / 1.32 = 23,964 units sold to fleets if they stuck with same percentage as 2008 fleets. A difference of 7,668 units.
Take away that many units from Hyundai's 2009 Q1 total and you get:
95,854 - 7,668 = 88,186
Compare that to 2008 Q1 (95,338 units sold) and you get:
88,186 - 95,338 = -7,152
Divide by 95,338 = -7.5%
So, Hyundai would be -7.5% for the first quarter of 2009 instead of what they actually are (+0.5%) if they had the same percentage of fleet sales as they did Q1 2008. Not bad considering the industry as a whole is averaging somewhere between -30% and -45%.
Tricky dicky 4:37PM (4/13/2009)
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.
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TriShield 5:05PM (4/13/2009)
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.
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Matt 5:37PM (4/13/2009)
Someone has to sell to the fleets. If the domestics won't, who will?
MM 5:10PM (4/13/2009)
In my opinion this is a stupid thing for Auto Manufacturers to do. It depresses demand for new when you can buy the same model, same year with 15-20K miles on it for 1/3 less.
Plus these vehicles are previously "ab"-Used, they will cause the manufacturer to be known for quaility issues as seemed to be always the case for GM, Ford, and Chrysler.
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wolverinejoe80 5:10PM (4/13/2009)
so if the fleet sales were their normal 15% they still would've posted top 3 numbers at around -14% -18%. give or take. still not bad.
but i expect them to be top 2-3 along with subaru because i heard Soul is selling like hot cake, and so is gen coupe. and when they add new line ups, it will only get better.
by this time next year, i think hyundai and nissan will be neck to neck. mark my word.
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wolverinejoe80 5:16PM (4/13/2009)
-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.
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Pokey 8:02AM (4/14/2009)
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. ;)
Mike 5:19PM (4/13/2009)
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.
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wolverinejoe80 5:23PM (4/13/2009)
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.
JeremyClarkson 5:28PM (4/13/2009)
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...
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n8new 5:48PM (4/13/2009)
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.
alex 6:16PM (4/13/2009)
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