Bonfire Of The Warranties
A war over warranties is set to erupt in the family car segment with the introduction of the new Hyundai i30. With prices starting from an ultra-competitive €17,995 for the Band A 1.4 petrol, you would think that the Korean brand would have sufficient USP to bring its new hatchback to the market, but Hyundai Ireland is using the occasion of the i30’s launch to taunt the competition over what it perceives as their lack of customer care. Hyundai has been offering a five-year, unlimited mileage warranty with breakdown assistance on all its models since November 2010.
Hyundai Ireland MD Stephen Gleeson told us at the i30’s launch that “With the way the economy has gone, people are holding onto their cars for longer. Our customers are holding onto their cars for longer. They’re keeping their cars now for three, four even five years where before it would have been just two.
“Realistically so, if you’re buying a Focus or a Golf today, there’s a fair likelihood that Mr Average Car Buyer is still going to have that same car in three years’ time. And if you’ve got a problem in three years’ time, if you breakdown at the side of the road, you’re on your own, because your breakdown cover has run out. And once you’re recovered, you still have to pay to get the car fixed. With us, we’ll pick you up, give you a courtesy car and fix your car for no charge. Our warranty is a big plus for us and it’s been one of the reasons behind our market share growth. We’re getting a lot of people coming in buying Hyundais who have just spent maybe €3-4,000 fixing a car that was out of warranty.”
While things are never quite so simple (even Hyundai’s warranty doesn’t cover wear and tear items that could easily bring your car to a shuddering halt in three years time) there is little doubt that having a lengthy warranty in a market climate where people are very reluctant to spend any money on their cars is a distinct bonus. That said, there is a cost involved to Hyundai in offering such a lengthy warranty, one that is currently being borne as the brand seeks to make a name for itself. If its sales rise to meet the Focus or Auris’ it may not be able to maintain such a system. Besides which, it would be interesting to see how much a new i30 would retail for if it came with a normal 3-year, 100,000km warranty.
Responding to Hyundai’s comments, John Donegan, Sales and Marketing Director at Volkswagen Ireland said: “Currently we have a very comprehensive 2-year warranty in place and we focus much of our resources into offering the best value to our customers on what are premium vehicles. Given the quality of our cars and the incredibly strong residual values enjoyed by our customers this is not something that we are looking to change in the short-term. Other manufacturers use warranty as a marketing tool to influence the market, Volkswagen prefers to concentrate on building great cars.”
Off the record, some Hyundai insiders will go further and say that other car makers simply can’t offer a longer warranty because they cannot yet build a car to a high enough standard to economically do so. Further scorn was poured on the optional extended warranties, which are dealt with by out-sourced warranty insurers, not the car maker itself. “It’s much easier to let an insurer brush customers off in three years time, and tell them that they’re not covered for something that’s broken” said one senior Hyundai executive.
That will be seen as serious fighting talk for a brand that has only mildly troubled the top-ten sales chart in the ultra-competitive Focus-Golf-Auris segment. The outgoing i30, critically well received though it was, barely scratched surface when it came to sales figures for the likes of the Ford Focus and VW Golf. The i30 found just over 600 customers in 2011, compared to more than 4,000 buyers for the Focus.
Hyundai’s competitors won’t be able to rest on their sales laurels though. Hyundai has consistently been on the rise, both in Ireland and Europe, over the past 18-months. Quite apart from a significant joint investment being made by Hyundai Ireland and Hyundai Europe to push the i30 out to new customers, there is the knock-on effect of the recent success Hyundai has been having with its other new models.
One of its biggest allies in its battle to double Hyundai’s market share in the C-Segment might be its big brother, the i40. Certainly, Hyundai people will admit that the brand still has a lot of work to do in terms of public perception, but the reception given to the i40 will give the i30 a leg-up.
“We would expect the i40 to build conquest sales for the i30” said Sarah Hayes, Hyundai Ireland’s Marketing and PR manager. “As well as that, a lot will come from some of our recent dealer appointments, who we expect will bring conquest sales from their previous brands.”