Q: After 13 months on the job, what are some of the key changes you’ve made in brand direction at Hyundai and Genesis?
A: We have a brand with great products and excellent quality, but there is a gap in perception between people who are familiar with our cars and our brand, and those who are not. Our mission is to ensure that people who are not familiar with the brand come to know more about it, and that they come to have an excellent opinion of it. But the fundamentals are there, including the product quality.
We know that we have opportunities to enhance both customer satisfaction and dealer facilities. In order to support the great partners that we have in our dealers, we launched Hyundai Accelerate and Genesis Keystone [compensation programs.] Those were really important milestones that we had to suspend for a while during the pandemic. But they are meant to support our good dealers in order for them to get even better.
Hyundai was quick to react to the coronavirus pandemic. Was that strategy successful?
Just a couple months back, J.D. Power was forecasting April to be about 80 percent down in sales from a year earlier. With no income — or just 20 percent income at best — and your normal expenses, you need to start planning what’s going to happen with your cash. And you need to protect your dealer network.
We took very bold actions to support our dealers. We were the first ones to take actions protecting the company, protecting our dealers and protecting our customers. For our dealers, the key program we put in place, which was completely different from our competitors, was a cash advance.
In April, we gained 0.7 percent of market share, and in May we were blown away with strong year-over-year retail sales growth of 5 percent and 1 point of market share growth year over year. A key success factor has been the fact that South Korea has probably been the benchmark in handling the pandemic worldwide, and we’ve learned a lot from Hyundai Motor Co. in Korea.
Can you maintain the market share gain from April and May?
I think we’re going to continue to see share gains at Hyundai. If you look at the performance that we had in the first two months prior to the pandemic, January and February, we were gaining market share big time. At the same time, we were less and less dependent on fleet, to the point where we were at the bottom, in terms of fleet sales as a percentage of our total sales. In May, it was about 5 percent.
To support demand, Hyundai increased incentives starting in March. Will those return to normal?
We have been step by step de-escalating some of the programs which have been popular during the pandemic. Some of the 0 percent/84-month plans and the deferred payments. We de-escalated a little in May, a little more in June.
There have been major executive changes under your leadership. Are those mostly done?
You can never say you’re done on anything. I think we’ve seen the biggest part of it. There’s always fine tuning.
What’s your prediction for Hyundai sales this year, or for industry sales?
This is something I would really like to know myself. Because every time we have a meeting with J.D. Power, they give us different views. I still remember vividly the meeting we had a couple months ago when they told us that in April you’re going to see a drop of 80 percent, in May you will see a 60 percent drop, in June probably 20 percent drop, and maybe in July you will be about 10 percent up. What we’ve seen is that the loss in April was very tough, about a 50 percent drop, May was very tough but way better than the prediction.
We see the gap in full-year sales somewhere between 2 million to 4 million units. Our focus is not on a certain volume number but to grow our share profitably.
Industry fleet sales are plummeting. Hyundai was already reducing fleet. Will that accelerate?
I think so. Over the last 12 months, we have become the second-lowest fleet company in America. The number for May was just 5 percent of our sales. And in the calendar year to date, we are at 10 percent.
Is this the right fleet number? I think it’s too low. This was not normal. A lot of the orders were either canceled or postponed. We are having a very strong retail momentum, so we are trying to prioritize retail orders.
Moving forward, we’re going to navigate to somewhere around 10 to 15 percent fleet. This is a healthy number. It’s good to have good product, well-equipped, that customers who go through that [fleet] channel can experience. The early signs are that consumers are more into using their own private vehicles that they can clean, that they control, rather than sharing vehicles.
We’ll see some fleet come back, especially the commercial fleet. We’ll see some rental come back, but certainly at a much lower level.
Can vehicles previously assigned for fleet be shifted into the retail channel?
When we saw what was happening with Hertz and the other rental companies, we immediately changed our production plan to prioritize retail orders.
How is inventory with your pipeline from Korea and Hyundai’s plant in Alabama?
During the first two months of the year, we were gaining retail sales growth of more than 20 percent, and as a result we were having an upward trend in production shipments. The starting point of this pandemic caught us with a very good level of inventory. If you compare us to other automakers, what happened is that South Korea recovered very, very quickly. Our plant in Alabama was back in operation on May 4. The plant has been working at a slower pace than before the pandemic, but it was back in production one to two weeks before our main competitors.
We have about 26,000 more units of dealer inventory now than a year ago. Because of the coronavirus sales problems in other countries, our plants in Korea have been able to give us better supply of some of those vehicles because we have demanded them.
How are Hyundai’s dealers doing after these difficult months?
We have put in place very strong programs to support our dealers, utilizing existing programs. But we’ve done advanced cash payment. That way, the dealers could have cash on hand and wouldn’t have to get rid of any of their personnel.
On top of that, we provided special assistance for those who asked for it through Hyundai Capital, which has been a great partner. I give kudos to members of our Hyundai and Genesis dealer councils. These people have been by our side. They’ve been giving us good ideas.
Will Hyundai be able to continue with its vehicle and dealer development programs?
Our parent company is very strong and has done a great job in Korea. They are already growing there. They have achieved all-time record Genesis sales and Hyundai is doing great. All our programs are developing on time. We have experienced some delay in homologation activities. In the United States, we need to get some certification and homologation, and it’s been shut down for everybody.
We may see one or two months of delay in some of the near-term launches, but nothing related to the development programs. All the activities that we are doing from the launch of new products and the ones coming up in the future — electrification — full speed ahead. We are discussing with our dealers when would be the best moment to resume Hyundai Accelerate and Genesis Keystone. The resources of the company are strong and we’re going to continue with our plans.
Should more resources be put into online sales coming out of the coronavirus experience?
Yes. We already knew that physical stores are less relevant today than 10 years ago. We said loud and clear to our dealers that even if our midterm objectives raise volume, we are happy with the number of dealers that we have. And we have several hundred fewer dealers than our direct competitors. This event has made us realize that store sales are less relevant.
We need to have the right locations. We know that, even during the lockdown, there were a number of people who wanted to go to a dealer for curbside service, pickup and dropoff.
But there’s no doubt that online sales has been one of the key success factors. In a short period of time, we’ve been able to deploy online tools with great support from the dealers. We are working on developing these even further. This has accelerated very much the direction we have already taken. Before and during the pandemic, we focused on getting the dealers online. And now we want to make sure that the online customer experience is not only available but is the best.
Hyundai released a plan for North America growth last year. Are those goals still valid?
They are 100 percent valid. The goal we presented was to get to 1 million units by 2025. And the goal includes improved profitability and improved consumer-facing transaction price. If anything, this process has accelerated the goal. We had a vision to get to a 63 percent mix of SUVs in total sales. In May, we achieved 71 percent. So am I confident of delivering 63 percent by 2025 when I am already delivering 71 percent when I get the right supplies? Hell, yes.
Is there room for any more crossovers in the Hyundai lineup?
We have the best product portfolio we have ever had. We have the Elantra launch coming up quite soon. We’ve announced that we want to have a very special vehicle in our portfolio, the Santa Cruz [pickup]. With that, we’re going to have a great portfolio. We’ll have electrification and green technologies more than ever. We see a significant growth in sales of our hybrid, EV and hydrogen vehicles. If the market gets back to the 17 million mark, we may even see the results achieved a little earlier.
Will Hyundai pull back on plans for electrified vehicles for financial reasons?
The plan holds. If there is one area of the company where there is a focus and a strong drive from the top to lead and to grow, it’s in green-car technologies. Hydrogen, hybrid, plug-in hybrid and EV.
We have a plan to ensure that we are better known as a green-car company in terms of development and the mix of sales.