Hyundai planning radical new sales strategy

Hyundai is planning a radical Australian-first overhaul of the way it sells vehicles Down Under within about two years.

The top-five auto brand wants to introduce a hybrid retail strategy that combines traditional dealer franchising with the newer online fixed-price agency sales model.

Until now, franchising and agency sales have been an either/or, fire-and-ice choice for auto brands in Australia.

The move by Mercedes-Benz and Honda away from conventional franchised dealer sales to the agency model has created controversy, a great deal of anger within their respective dealer networks and legal challenges.

But Hyundai Motor Company Australia (HMCA) chief operating officer John Kett stressed the new model was intended to be complementary, not a cause for confrontation.

“I think it is a couple of years away,” Kett estimated, when asked when the hybrid model might be adopted.

“We are very clear on what we would like to do, but we want to work with the network.

“Certainly, when you run an agency model it can spook all the investors in terms of what you are thinking going forward.”

The agency model effectively turns dealers into delivery agents for auto brands, handing over cars to buyers for a fixed fee.

But under traditional franchising arrangements, dealers buy vehicles from the car company and make a profit (or loss) based on negotiations with individual buyers.

When demand far outstripped initial supply, HMCA sold its IONIQ 5 and 6 electric cars online via the fixed-price agency model.

But as reported first by carsales in April, it has swapped to franchising for its two bespoke EVs, which now join the Kona Electric in dealer lots.

HMCA says it dropped fixed pricing in part because of its growing EV line-up. It will roll over to facelifts of the IONIQ 5 and 6 soon, followed by the brand-new Inster compact SUV and IONIQ 9 seven-seat SUV when they arrive in early 2025.

But abandoning agency sales is also an admission that Hyundai has gained precious little cut-through with the IONIQ 5 and 6. They have managed to attract just 774 buyers to the end of June, compared to combined sales of 23,116 for the (more affordable) Tesla Model Y and Model 3 in the same period.

“We don’t think we do a good enough job on IONIQ anyway and certainly Kona doesn’t get the job done in the way we expect,” said Kett.

“That’s on us in terms of promoting EVs down the right channels.

“We needed to bring the IONIQ back to the network to give us geographical coverage, that’s been really important to us,” he added.

“Also knowing many of our future nameplates will carry the IONIQ nameplate… we need critical mass in our network to keep them viable going forward.

“That’s been important to us.”

But Kett says there were enough positive learnings out of the fixed-price experience to warrant its return alongside the dealer network.

He argued the hybrid sales structure would reduce the cost of floorplans for dealers as the Hyundai range expands.

It would also provide flexibility for those customers who wanted to purchase online at a fixed price without negotiating with a dealer.

“We believe it could be as high as 10 or 20 per cent of customers are happy to do that if you have an online financing and certainly an online trading quotation system.

“But everyone else wants that touch and feel and experiential process inside the dealership.

“We feel as we go forward there needs to be an ability for the consumer to buy any way they want to buy at any time.

“[We want to] get the efficiencies of that online business model into our franchised network so their incremental sales truly come at incremental profitability.”

Hyundai will launch its own finance arm in Australia later this year.

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