Examine US car sales for the past several months and that information reveals that Subaru, Hyundai and Kia have all performed quite well despite one of the worst economic downturns in our lifetime. Even as General Motors, Ford, Chrysler, Toyota, Honda and Nissan experience month over month losses of 35% or more, the three success stories are showing slight losses or in the case of Subaru even coming out ahead.
Hyundai, Kia Pull Ahead
But now we learn that a big reason for the increase in sales for the two members of the Hyundai Kia Automotive Group has much more to do with a sharp increase in fleet sales than just retail demand. According to Automotive News [subscription required], Hyundai and Kia have expanded their presence in the fleet market, replacing GM, Ford and Chrysler who have cut way back on this practice. Indeed, for the first quarter of 2009, fully one-third of Hyundai’s US vehicle sales were to car rental companies including National Car Rental, Hertz and Enterprise.
GM, Ford and Chrysler have long used fleet sales to help sustain market share, but that practice has had an adverse impact on resale values across the product line. For example, with a large number of 2007 and earlier Chevrolet Malibus in the fleet system, the resale price for these cars had long been held down even impacting customer perception of the 2008 and later Malibu. The newer Malibu underwent a major design overhaul for 2008 and is not part of GM’s rental car strategy at least to the extent of years past.
Big Three Rental Program Participation Down Sharply
The Big Three’s participation in rental programs decreased significantly in 2008 with GM down 90%, Chrysler off by 75% and Ford down by 65%. Hyundai and Kia have filled that vacuum with their own cars meaning your chances of renting either brand while visiting your favorite car rental company has now increased dramatically.
Though fleet sales help to increase market share, they also are among the least profitable sales for car companies. Ordered vehicles are typically sold at big discounts resulting in razor thin profit margins in exchange for increased profit share. Moreover, when these same vehicles are resold in the open market after one or two years, resale values drop thanks to a glut in inventory.
Lastly, customer perceptions about a brand are often formed when renting particular make/model with some poorly optioned fleet cars offering little reason for renters to consider the brand.
Also Read — Kia Soul’ster: Variation on a New Theme
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