Hyundai Changes the Way Its Dealers Sell Cars

By Adrienne Roberts Features Dow Jones Newswires

Hyundai Motor Co., aiming to shake up the way its dealers sell cars, said Tuesday it will now offer to conduct test drives at a person's home or at a location of their choosing and sell its cars with a rare three-day money back guarantee.

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The Korean auto maker landed upon the strategy after studying used-car retailers and online sellers, including Amazon.com Inc.

The plan, dubbed Shopper Assurance, comes at a time when car sales in the U.S. are plateauing and Hyundai's sales have sharply fallen as executives say the company was too slow responding to market shifts. Hyundai has relied more heavily on passenger cars than crossovers or SUVs of late, leaving it out of step with customers demanding bigger vehicles in response to low gasoline prices.

Shopper Assurance includes a "flexible" test drive where the car is dropped off to the consumer wherever they would like, such as a coffee shop or office. Certain buyers prefer to avoid visiting dealers and this could lower the fear of high-pressure sales tactics.

Hyundai also plans to be more transparent on the pricing published on dealer websites, and will work to speed transactions by allowing customers to complete most of the paperwork before stepping into the showroom. The money-back guarantee has been tried in the industry before, but it isn't a standard practice -- most sales, in fact, are final.

Dean Evans, chief marketing officer of Hyundai Motor America, said dealers aren't forced to participate, but he expects most will.

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Hyundai made a big splash in the late 1990s when it launched a 10-year, 100,000 mile warranty, which addressed concerns about the company's quality. Those warranty terms -- adopted by some rivals in following years -- far exceeded industry standards, and led to a sales surge for Hyundai that spanned more than a decade.

Mr. Evans said Hyundai is now trying to address issues other than vehicle quality -- which Hyundai now receives high marks for. Sales are off 13% through September compared with the year-ago period, and the company's U.S. market share has been stuck in neutral for several years.

"We recognize the world is bigger than the car," Mr. Evans said. "What are you doing for the customer before and after they buy the car? Hopefully, they come back to the brand."

Mr. Evans said Hyundai studied the retail models of the car-buying startup Carvana Co., which sells cars out of a vending machine and offers delivery, the used-car retailer CarMax Inc. and Amazon.com. when designing the program. The auto maker surveyed consumers and found 83% of respondents would consider Hyundai over another brand if it offered the four components of the Shopper Assurance program.

Other auto makers -- mainly luxury brands -- and dealership groups have offered parts of this plan but not all combined, said Rebecca Lindland, an analyst at the car-pricing service Kelley Blue Book.

Buick began offering a 24-hour test-drive program at participating dealerships in 2015. That brand's owner, General Motors Co., offered similar promotions in 2003 and 2004.

BMW AG also offers an extended test drive for some of its cars.

"I think there are parts [of Shopper Assurance] that will gain widespread appeal," Ms. Lindland said. "I think that we'll see these kinds of programs because we're in a post-peak market and an evolving generational marketplace."

During the financial crisis, Hyundai allowed customers to return a newly purchased Hyundai if they lost their job or income within the first year of ownership.

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com

(END) Dow Jones Newswires

October 10, 2017 15:17 ET (19:17 GMT)