Buyers on a budget are set to be the big winners of a fierce battle brewing between two sibling rivals Hyundai and Kia over the next three years.
A looming sales battle between sibling rivals Hyundai and Kia in Australia is poised to deliver sharper prices and better deals for buyers on a budget.
South Korean car giant Hyundai says it is poised to bounce back off the ropes and aims to top 100,000 annual sales – a 30 per cent increase on today’s rate of deliveries – and retake the lead over sibling rival Kia.
The company says within the next few years it will ramp-up production and be boosted by the arrival of new models.
Hyundai sales in Australia were in free-fall for four years in a row – after eclipsing 100,000 sales for three years in a row (2014, 2015 and 2016).
Over the same period, arch-rival Kia posted eight successive years of sales growth.
The battle between the two culminated in Kia turning the tables on its big brother last year – outselling Hyundai for the first time in Australia since the brands were established here three decades ago (78,330 versus 73,345 according to data from the Federal Chamber of Automotive Industries).
While some industry observers had written-off Hyundai and saw the shift with Kia as a changing of the guard, the company says severe supply restrictions hit Hyundai harder than they hit Kia.
When asked if Hyundai would regain its lead over Kia this year – or if that would ever happen again – the boss of Hyundai Australia, John Kett, told a media briefing in Sydney last week:
«When you see the (sales) scoreboard, we just have to accept where we sit. So if they (Kia) beat us, they beat us. We don’t like it. But if they beat us, they beat us.
«We don’t like being fifth, we don’t like being sixth (on the sales charts). But when we look at our supply chain and the vehicles we do have … and we’ve hardly got any inventory available to be (number) two or to be (number) three (in the market), we have to be comfortable in the fact that we’re making progress.
«When it comes to our aspirations to be significantly more than we are today, we are (trying). As supply eases … we know we are a significantly bigger business than the 76,000 or 77,000 (sales per annum) that we will do this year.»
When asked if Hyundai Australia would eclipse 100,000 annual sales ever again, Mr Kett said:
«If we had access to every single vehicle and rebuild our business around private buyers and small business buyers, and then augmented it with fleet sales, then our current portfolio would get us somewhere between 90,000 to 100,000 sales (per annum).
«(But) we’ve never been able to get that supply and we’ve never been able to prove it. One of the great challenges, Hyundai is such a fast-changing business, even this year while we’re trying to get access to more cars (the company says) ‘hang on a second, we just need to put a facelift on all of these vehicles’, so it slows down the supply chain again.
«We’ve got to believe that we can recover that past glory at least partially (and land) somewhere between 80,000 and 90,000 (sales per annum) as quickly as we can and everyone can feel good about it.»
However, the Hyundai Australia executive said the company would not jam cars into rental and business fleets at reduced prices just to win a sales war.
«We are trying to avoid going back to the insatiable appetite to win,» said Mr Kett because, in the process, you «just destroy everything about your business.»
«The last time we sold a 100,000 cars was in 2016 and we nearly killed everyone to get there,» he said. «No-one made any money and no-one can remember us for it, especially consumers, because they were all sold to fleet.
«The reality is the next time we do that again (eclipse 100,000 sales in a calendar year), let’s make sure we do it in a way that the customer felt like they got some value (and that) our network felt like they made some money and we left with some money in the tank to keep us in those (future model) programs.
«I know it sounds altruistic, but if we don’t correct that (focus on sharp discounts), we see what happens to other brands when they just slip away.
«We’re not panicking about it. We believe in the Hyundai portfolio (and) the investment they’re making (in future vehicles).»
Mr Kett said Hyundai had been hamstrung over the past few years due to limited supply of Venue and Kona, its two most affordable SUVs.
«We were playing with a chess set and we don’t have Kona. We never really had it. We were playing with a chess set and we couldn’t get enough Venues. So our sub-$35,000 or sub-$30,000 cars, we just didn’t have enough of. So in the chess set (the portfolio of Hyundai cars) we are relying on too few products to deliver us that number.»
When asked how long it would take to top 100,000 sales again in a calendar year, Mr Kett said:
«We hate losing but we can’t whine about it. What we’ve got to make sure is we get year-on-year growth, year-on-year (market) share gains, and if we look after those two – and then put pressure on it to make sure it happens in all of those segments – you can only realise our ultimate dream by 2025 and 2026.»
When asked to clarify this timeline, Mr Kett said: «We’ll get there when we get there. Whenever we set numbers … we destroy our own business. We know that.
«The main thing for us is year-on-year (market) share growth, volume share growth, and know that everything else will look after itself from there.
«We don’t want to talk about (sales numbers), but we don’t like the position we’re in today. We will fight car by car, month by month to try and restate where we are, to find that balance between volume, consumer benefit, and profitability. We’re all trying to do that.»
When asked if this meant Hyundai Australia was turning its back on fleet business, Mr Kett said:
«It’s a poor business (model) when the majority of our volume to get to scale is fleet. It’s an incredible opportunity when it’s incremental to our core business, which is private (buyers) and small businesses that drive the higher trim levels and (higher prices).
«We never see (fleet) as a villain … it should be complementary volume and (for) long-term business relationships. Unfortunately, historically, we had it the other way around.
«If fleet does grow, it will probably drive some of our trim levels back to the entry level (cheaper models). We’re comfortable if that’s incrementally a part of our core business.»
When asked if vehicle supply and discounts were starting to return to pre-COVID levels, Mr Kett said there are some discounts and pockets of over-supply starting to emerge.
«We can see more cars coming into the country (across the auto industry) this year than last year and … more cars are being stored in compounds,» he said.
«We think the (Australian new-car market this year) is still tracking towards maybe 1,050,000 … but certainly we’re seeing some softening in the order-write.
«We’re less concerned about the softening in the order-write because fleets have largely been out of the market for three years, and they’ve still got pent-up demand.
«We feel like the industry will probably hold pretty close to where we expect it to be, 1,050,000 …. not too far off the Australian market peak (1,153,000).
«When you get fleet coming in at the penetration that they do … you start to see some profitability challenges.
«But when we think about (Hyundai Australia) … we’re certainly confident that we are going to exit this year with year-on-year sales growth, and maybe some gain in overall market share.»