How Hyundai and Kia are bucking Canada's downward sales trend

Hyundai and Kia are bucking the downward sales trend in Canada, thanks to an expanding utility-vehicle portfolio and different approaches to retailing that have sometimes ruffled dealer feathers. 

For the South Korean brands — newer to the Canadian market than many competitors from the United States, Japan and Europe — it’s a sign that consumer perceptions of their vehicles are changing. The notion that buying a Kia or Hyundai vehicle means settling on quality is becoming less prominent among Canadian buyers, if growing sales and high marks for quality in consumer studies are any indication. 

“I think it comes with the territory that when you’re a relatively new brand relative to the domestics and even the Japanese, you get started with a value proposition and then you try to move to a premium proposition over time,” Hyundai Canada CEO Don Romano said. 

“To me, it’s natural. The shrinking [perception] gap will continue because it’s a function of us being a newer brand than our competition. 

“There are still people out there that don’t pronounce Hyundai the proper way, so there’s still work to be done to get the numbers up. But it’s happening and heading in the right direction.” 

IMAGINE THE FUTURE 

Hyundai and Kia, as well as the Genesis luxury brand, have been on the receiving end of good news in a year marked by slow sales for most brands. Hyundai was up 3.5 per cent through September to 103,149 units, while Kia rose 4.1 per cent to 60,113. That flies in the face of overall sales that fell an estimated 4.1 per cent during the same period, according to the Automotive News Data Center in Detroit. 

Hyundai and Kia also finished second and third, respectively, in J.D. Power’s annual Initial Quality Study, trailing only Genesis. 

“If this is where we’re at [now], I can only imagine what it will be in the future,” said Elias El-Achhab, Kia Canada COO. 

For both the formerly car-heavy companies, a host of new utility vehicles is helping drive growth. Hyundai has the new Kona and Palisade, while Kia recently launched the Telluride. 

Dave Sargent, vice-president of global automotive at J.D. Power, said consumers are drawn to the brands because features such as their infotainment systems are easy to use. Other brands, he said, get tripped up in the Initial Quality Study because of software and other non-manufacturing-related issues. 

THEY KEEP TECH SIMPLE 

“When they have decisions to make around ‘Do we do what the consumers want, or do we compromise for other reasons?’ they almost never compromise,” Sargent said. 

“They tend to keep their technology simple. It’s not that they don’t have voice recognition or Bluetooth or CarPlay, but they don’t over-engineer it. They give consumers 95 per cent of everything they could want in a very simple-to-use form. 

“You get into a Hyundai and everything kind of works the way it’s supposed to. There’s not a lot of fumbling around and trying to figure out how this works.”

Romano also attributed some of Hyundai’s growth to the automaker’s dealer-image program, launched globally in 2014. It will draw a compliance rate of 90 per cent among Canadian dealers by next year, he said, adding that it was critical to improving the company’s dealerships and reassessing Hyundai’s processes as new vehicles came down the pipeline. 

“It included things like washing every car after service,” Romano said. “That adds time and expense to the dealers in addition to the new facilities. 

Dealers “weren’t happy,” he said. “But then, business started to improve. 

“We took our sales expectations down. Instead of pushing for market share, we let natural demand take place. That allowed us to reduce inventory and inventory expenses for our dealers. Then the next year [2017], business got a little better for them. And then last year we started hitting our stride. Now, they’re real happy.” 

Still, it’s not all good news for the brands. Neither Kia nor Hyundai is immune to the shift in consumer preferences away from cars toward utility vehicles. And as Romano noted, brands that depend on imports are hurt by a low Canadian dollar. 

“The worst thing anyone can do in this industry is become overconfident. We just have to constantly innovate, constantly prepare, constantly push the dealers and have them push us on how we become better.”