Hyundai may be hot, dealers profits are not

2011 Hyundai Equus
2011 Hyundai Equus

For all of its sales success in the US as of late in terms of style, market share, and an upscale movement, Hyundai is still unable to offer its retailers something crucial; dealer profitability. The average profit margin for dealers stood at just 1.9% of sales in 2010, up from 1.2% in 2009, and 0.8& in 2008.

Despite the growth however, Hyundai still lags behind Honda, Toyota, Chevy, Ford, and Kia in dealer profitability. Slow traffic in the service bays, weak used-car sales, and tight inventories of newer, more popular models are all contributors to the low margin.

“Our goal is to be in the very top of the non-premium makes,” says US sales boss Dave Zuchowski. “We’re not there yet, but we’re making great progress.”

The industry average according to the NADA was 2.1% in 2010.

It is important to consider however, that most dealerships can recover about 85% of overhead costs through the service department. Hyundai has very few cars on the road in the US, having sold 500,000 units for the first time in 2010. This inevitably means that there are less cars to service. Zuchowski also attributes this to improved quality across the brand.

-By: Stephen Calogera

Source: Automotive News