https://www.drive.com.au/news/hyundai-aims-to-overtake-kia-top-100000-sales/
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 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.
- Drive.com.au, 3rd Jul 2023
- Canberra Times, 8th Jul 2023
In an article which appeared in the Sydney Morning Herald and Canberra Times on Saturday, which was already posted on drive.com.au five days earlier, we have what appears to be a puff piece with no substance, where someone at the Nine Ent Co. newspaper group has spoken with the CEO of Hyundai Australia, John Kett, and taken down a few quotes. Hard-hitting journalism this is nor; not is it particularly informative because as nothing more than a wholesaler/retailer of imported goods, Hyundai Australia is as much at the whims of its parent company as any other auto maker is.
This article offers no hints about how Hyundai Australia is going to get to 100,000 sales per year, nor what kinds of cars it intends to sell, nor what future price structures are going to be. However what this article does tell you is that Hyundai Australia's strategy is doomed from the outset. I can say this without any clue of their business plan because I can do simple maths:
"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."
- Drive.com.au, 3rd Jul 2023
- Canberra Times, 8th Jul 2023
To wit.
100,000 sales per year is 8333 per month and consistently VFACTS tells us that the only vehicles which have done better that since the end of VF Commodore, have been Hilux and occasionally Ranger. These two vehicles themselves are in fact distortions upon the market because the people who buy Hiluxes and Rangers are almost all tradies and therefore are able to write off the capital cost of the vehicles as depreciation expenses and get a tax benefit for it. If Hyundai wants to break into that market, they will find it difficult against Hilux, Ranger, Triton, D-Max, Amarok, BT-50 et cetera et cetera et cetera.
However, if Hyundai Australia wants to sell 100,000 per year and doesn't want to break into the tradie market, then it actually has to dare to sell cars to ordinary people as regular retail sales. Guess what? That's hard.
I have now seen enough of the accounts of General Motors to ascertain that the total claimed development costs to bring the VE Commodore to production status, was A$993m. The wholesale landed costs of the VE Commodore to an average dealership in a metropolitan area was a shade under $30,000. This means that at the standard retail price of $35,990 for the normal VE Commodore Omega, the markup was 19.9% or the profit margin was 16.6%.
If we assume that the $30,000 landed costs are the total cost per unit to achieve break even for Holden, then to recoup the initial development costs, Holden would have needed to sell 33,100 units. At an average of 6000 units per month, then Holden would have recovered all of the initial costs within six months.
Therefore, the issue was never ever that the Holden subsidiary wasn't profitable because it was always rudely profitable for most of the 71 years of the company as a logical General Motors subsidiary. The issue was purely that on the 10th of Dec 2013, the then Treasurer Joe Hockey thundered on the floor of the parliament that he might take away the subsidy payments. Within the week, head office in Detroit made the announcement that it was going to end production in Australia; even though Holden was the most profitable arm of General Motors in the world.
If inflation has been running at 6% for the last 20 years, then we can roughly assume that to bring a brand new car to market costs something in the order of $3,250m.
$3,250m / 5 years = $650m per year.
$650m per year / 12 months = $54,166,666 per month
At 8333 units per month, which is what Hyundai Australia wants to achieve, then they'd need to sell every unit at $6500.27
Here's where the rubber hits the road. At $6501 per car, Hyundai Australia would sell lots of cars. However, since we already know that for every dollar that you increase the price, the total number of sales is going to drop because consumers can not instantly change how much money they have to play with, then this might be an uphill struggle. I have absolutely no doubt that Hyundai Australia could make and sell a very very nice $6501 motor car, however they're not going to. Would Hyundai Australia sell a $20,000 motor car? Arguably they already do but the i20 and i30 just don't set the world on fire in terms of sale figures.
If a quiet revolution is going on at Hyundai where they intend to sell 100,000 per year, then I don't see how they can immediately do it. You just can not wave a magic wand and make a thing happen by making an announcement. If I was CEO of Hyundai Australia, then my strategy would be eat what used to be Ford and Holden's lunch and sell Focus/Cruze sized car. That might sound like idiocy in a world of SUVs but here me out. It already exists. i30 is already the machine that they need to sell but with a name like i30, it means nothing.
If the car was styled nicely, then given a tricked out GT version and went racing in the Bathurst 12 Hours, then you might be able to create enough buzz around the car to sell that 8333 per month. Race on Sunday, sell on Monday? Maybe not, however as it currently stands, I have no idea exactly how Hyundai Australia squares the circle.
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