Hyundai dealers weathered a difficult year for the U.S. auto market with a 9.7 percent sales drop, which outperformed the market overall, and surprising gains in retail market share and dealer profitability.
That came from quick and decisive action from the factory in terms of financial support to dealers and generous vehicle incentives but also from a growing product portfolio that has created significant momentum at the Korean brand.
For 2021, that game plan will help retailers continue to notch market gains, with a new generation of the Tucson compact crossover coming to the biggest nonpickup segment in the U.S., along with a compact pickup and a new electric vehicle subbrand.
“You can never have too much of a good thing. It’s great product, and the dealers are just like, ‘Keep it coming,’ ” said Kevin Reilly, 51, the new chairman of the Hyundai National Dealer Council and owner of Alexandria Hyundai in Virginia.
Reilly said one of his goals is to keep communication flowing between dealers and Hyundai Motor America on pressing issues, such as implementation of the Accelerate facilities program, which was postponed last year because of the pandemic.
Reilly spoke with Staff Reporter Laurence Iliff. Here are edited excerpts.
Q: What are your goals for 2021 as dealer council leader?
A: One of my primary goals is communication, and I’m going to explore different media to reach all 800 Hyundai dealers and communicate to them exactly what’s going on. To make sure they’re in the know about what we’re talking about, where we find some common ground and where there’s still work to do.
Are you looking forward to the day when dealers can again all get in a room to talk, or has remote communication been effective?
I am looking forward to getting together. I’m thankful for Zoom; I’m thankful for these technologies because at least we can communicate on a regular basis. But the dynamics of communication will never be the same as when we’re in the same room. The conversation is more bidirectional in person, and when you’re on Zoom it tends to be unidirectional. With in-person meetings, the relationships that you strengthen and the things you talk about happen a whole lot more quickly, and I think we advance the ball more quickly than with Zoom and these technologies. Not to say they aren’t useful. Going forward we can leverage them for more regular meetings. But for the big meetings, in person is important.
How are dealers feeling about product in 2021? Will this be another big product year?
There’s a lot to be positive about being a Hyundai dealer, but if you had to put something No. 1 on the list, it’s the product. The cadence is amazing. And the great thing for Hyundai dealers — frightening thing for everyone else — is that it’s only getting stronger.
You’ve got the Palisade, which sold over 80,000 units last year. That just came on like a storm, and we can barely keep them on the lot.
What’s even more interesting is that you have the all-new Tucson that will be out in a few months. It’s an absolutely gorgeous vehicle; it’s a high-volume vehicle and will make Tucson sales even stronger.
And then the Kona, which is very popular, at 76,000 unit sales. It’s going to be enhanced this year. Not a total redesign, but an enhancement.
Then we have the Santa Cruz open-bed, lifestyle pickup truck. I think that’s going to be, while not a huge volume vehicle, a nice addition to the lineup that the dealers are looking for.
And then on the EV side, you have the Ioniq 5 coming out later this year.
We’re super fortunate with what we have coming this year, and arguably it’s going to be better next year.
With all the new vehicles, hybrid options, N Line sport trims, special editions, Ioniq EV subbrand, is it ever too much to absorb?
You can never have too much of a good thing. It’s great product, and the dealers are just like, “Keep it coming.”
What we can do as dealers is communicate with the manufacturer. Take a look at the trim levels and take a look at the option packages, and the more we can manage those and keep those to a reasonable number, the more likely our dealers can have the right vehicle for the customer on the lot.
And that’s one of the things that Hyundai has been receptive to. They do a good job over time reducing complexity. The Elantra GT [hatchback] went away. And this is just a dealer speaking, not Hyundai, but the Venue crossover now outsells the Accent sedan. They may take a hard look, at least from a dealer recommendation, if they want to sell the Accent when you have an excellent Venue and you have other products that we want to focus on. I can’t speak for Hyundai, but those are the types of things we would like to have a discussion about.
How do Hyundai dealers feel about the Ioniq subbrand and the prospects for making money selling EVs?
I’m extremely excited about it. I’m in Virginia, which I think very soon will be a ZEV state. I’m very much looking forward to the rollout of the EVs. I bought my daughter a Kona EV. I found that it was just fantastic, the range of the car, the acceleration.
I think you’re going to see EVs take off in the United States, from a socially conscious perspective and from a performance perspective. They are really fun to drive. Once there’s awareness, economies of scale, efficiencies in the system where they become reasonably affordable to customers, I think you’re going to see a sales spike.
And speaking for Hyundai dealers in general, this is the future, and I’m very thankful that our OEM is taking a leadership position on it. As dealers, we’re going to adapt — like we have for decades and decades — and meet our customers’ needs.
How is the rollout of the new Accelerate facility and compensation program going, and how are dealers feeling about it?
A lot of dealers I’ve talked to — for a long time and even before Jose Muñoz became CEO — they’ve wanted a facility program because Hyundai really didn’t have one. There are many dealers across the United States that need and want to improve their facilities. And so we’ve got a facilities program. Our interests are aligned: We both want to upgrade the image of our facilities.
The key, and we’ll see this in 2021 because the program is really just rolling out, is the flexibility and the collaboration. Hyundai has a commitment; they’ve communicated that they will be flexible with dealers. As long as that flexibility exists, that’s going to allow dealers to have the opportunity to improve their dealerships.
How are dealer profitability levels at this point in the pandemic? How sustainable are vehicle margins as inventory improves?
We just closed 2020, and people are still doing their December financial statements, but it will probably come in as the most profitable year for Hyundai dealers in their history — No. 1. That’s fueled by Palisade, the tremendous product we have. And if anybody had told me that was going to be the case in March, I certainly would not have believed them.
About margins, as we go into 2021, we’ll have to see where supply and demand comes out. Demand for Palisade has been very strong, so there are good margins on that product, and we hope it remains strong. As we look at profitability in 2021 and beyond, what I find interesting are the macro indicators. There’s a lot of money that has been and will be pumped into the economy, so you would expect at a certain point that interest rates are going to rise and could rise significantly. I think macro factors will come into play in 2021 or 2022.
Are Hyundai production and inventory levels coming back in line with demand? If not, where are the shortages, and when do dealers expect meaningful progress?
The one model that stands out that I know dealers could always use more of is Palisade. Hyundai is aware of that; Hyundai has responded and gotten more Palisades. That falls under the category of something my father said a long time ago, “Well, that’s a happy problem.”
Is Hyundai doing enough to promote certified pre-owned sales?
It’s an award-winning CPO program; there is a lot of value to it. One thing that I think is encouraging to hear is that it’s going to be getting even more attention, I think, from the executive level in 2021. This is just me hypothesizing, no one has told me this. But I think there’s going to be even more focus because it just does so many good things for the brand, for the residuals, there’s just a lot of good things that come out of that.
Is Hyundai adequately advising dealers on the future of mobility services, autonomous vehicles and vehicle electrification?
They’ve done a good job communicating to dealers where Hyundai globally — and by extension [Hyundai Motor America] — where they are going in the areas of EV, mobility, things of that nature. As a dealer council, we’ll be working with dealers to say, “Here’s the direction Hyundai is going, and here’s how it’s most likely to affect your business.”
The EV program is part of that Accelerate program in terms of how we demonstrate the EV technology to the customer, how we make the service bays ready for that technology. There is a plan in there, and I think it’s going to be more pronounced and communicated as we go forward.
How has Hyundai helped dealerships navigate the changes brought about by the coronavirus pandemic?
One of the things they did to help the dealers navigate this crisis, and especially at the dealer council level, was lots of communication. They were communicating with us regularly, early and often. And that communication helped. As dealers, we were trying to absorb information about what were the local protocols, guidelines on PPE, and how do I train my people and keep them safe. It was a lot, seven days a week. So having your OEM communicate with you quickly was good.
From a collaboration point of view, they did listen to the dealers. They took actions that helped us, by adjusting objectives, which allowed us to achieve some modicum of profitability and have the revenues where we could keep people on staff and invest in the PPE that we needed to take care of our customers.
Is Hyundai looking to assist dealers with selling used vehicles through a national platform, given the success of companies such as Carvana? Is there dealer support for that?
From a used-car perspective, we appreciate Hyundai’s CPO program; we appreciate the increased emphasis on the CPO program. I think that’s where we look for the help and support from Hyundai. In terms of selling the other used vehicles, each dealer is going to know what works well in their individual market and how to service that market. From a national level, we just want to make sure that people are aware of all the benefits of owning a Hyundai CPO.
How has salesperson productivity at Hyundai dealerships changed during the pandemic?
I can only really speak to our dealership. Our average salesperson sells about 14, 15 cars a month. Our new-car sales actually increased from 2019 to 2020 by about 10 percent. In December, we were up 43 percent retail. So the productivity did increase. They adapted well, they adapted quickly. Coming out of it, they are going to have all these additional skill sets, and people will have gotten used to a more remote-type environment.
How are fixed operations doing for Hyundai? Has revenue returned to pre-COVID levels?
For my store, we’re nearly back to pre-COVID levels. March and April in sales and service were the two most difficult months before it rebounded. Service was slower to rebound than sales but ultimately did. Year-over-year service, we were off about 10 percent, and parts was essentially flat. We’re almost there.
One of the things I think we discovered, and the customers discovered, is the convenience of pickup and drop-off. We have a lot more customers taking advantage of that. When we worked with our parts and service reps from Hyundai, they wanted to make sure that we had pickup and drop-off prominently on the website.