NEW YORK – Convinced low prices and skyrocketing incentives won’t draw buyers to new-car showrooms in the current economic climate, Hyundai Motor America Inc. says it may have found a better answer for boosting sales.
In fact, the recently launched Hyundai Assurance Program has been such a hit Hyundai already is planning to announce an optional extension of the buyer-protection offer next month.
Currently, the free program promises the auto maker will take back vehicles in the first year of ownership from buyers who lose their incomes as a result of the deepening recession.
But under the extended program, customers will be able to purchase an additional two or three years of protection.
It took a mere 37 days from concept to launch for the initial Hyundai Assurance Program, says Joel Ewanick, vice president-marketing.
“We found right away that people knew we were projecting hope,” Ewanick tells the International Motor Press Assn. here, predicting Hyundai will maintain the offer for at least a year. “It can’t be something you can get in and out of (quickly).”
The program is open to customers who are qualified for financing. They must have made at least two full payments before they can seek to turn in their vehicle if faced with a loss of income.
“It’s as close to a silver bullet as we can find,” Ewanick says of the sales promotion.
Dealer switchboards lit up after the sales-promotion was launched.
“This program is designed for people with decent jobs with good credit histories,” the Hyundai executive says. “If you can get financed, you can qualify.”
Hyundai has budgeted enough to take back vehicles, but Ewanick declines to say how many cars could be turned back under the program.
“The assurance program resonates with all demographic groups,” he says. “It touches everybody.”
Dealers have been overwhelmingly supportive of the idea.
HMA CEO John Krafcik says the trade-in value of the vehicle will be determined by the average of four different estimates.
“That value is compared to the loan amount, and we handle the first $7,500 of negative equity, which should handle the vast majority of situations,” he says.
Most Hyundai vehicles typically lose less than $7,500 in equity during the first year of ownership, he says.
Hyundai has about 800 U.S. dealers, about half of them exclusive to Hyundai.
“We’re going to lose some dealers this year, but I can’t predict how many,” he says. “Fewer dealers are profitable today.”
The percentage return on sales declined for dealers last year, Ewanick says, adding there is potential for the recession to drag on.
“It’s hard to predict when this downturn will end.”
Hyundai did relatively well in the U.S. last year. Its sales fell 14.0% in 2008, but it gained one-tenth point of market share to 3%.
“We’re fighting for every tenth of a point we can get,” he says.
Hyundai’s sales this year will depend on gasoline prices, Ewanick says. “More fuel-efficient models will climb (in volume), if gasoline prices increase.”
Hyundai now is the No.5 auto maker in the world, up from No.11 six years ago, the executive notes. Much of its success in the U.S. stems from an industry-leading 10-year, 100,000-mile (161,000-km) warranty, including 5-year and 65,000-mile (105,000 km) powertrain coverage.
The warranty is one of the top three reasons customers purchase Hyundai vehicles. Price and styling are the other two.
– with Christie Schweinsberg in Detroit