Although John Patterson has operated Tustin Hyundai in Tustin, Calif., only since March, he has already more than quadrupled the store's average monthly new-car sales, to 85.
Patterson acquired the Hyundai dealership because he had seen the brand's sales and market share increase over the past two years.
The dealership "was underperforming, in my opinion, whereas other Hyundai dealers were selling much higher volumes," said Patterson, who also owns Mazda stores in Tustin and nearby Huntington Beach.
Patterson's success with Hyundai is being replicated around the country. Forty of Hyundai's 803 U.S. stores have changed hands this year, and the pace is heating up. Just since Sept. 1, 19 of those deals were completed.
Dave Zuchowski, Hyundai Motor America's sales boss, said the new owners represent a welcome trend for the once-bargain-basement brand. In most of the deals, larger, experienced dealers with deep pockets are paying high multiples to replace owners running underperforming stores.
Penske Automotive Group, for example, acquired a low-volume Hyundai store near Phoenix in the first quarter.
"I think they are viewed as an attractive opportunity, whereas, four or five years ago you were unsure of the footprint the brand was going to garner," said Penske spokesman Tony Pordon.
Hyundai franchises are more attractive today because the brand has increased its U.S. market share and expanded its lineup with new and improved vehicles, Pordon said. Significantly, some of those vehicles are much more expensive than Hyundais of the past.
Other large dealership groups are getting in on the action. Group 1 Automotive, AutoNation and large private groups have bought stores this year, Zuchowski said.
On Nov. 15, Hendrick Automotive Group, a Charleston, S.C., dealership group that was the seventh-largest auto retailer in the United States in 2009, bought a Hyundai point in Charleston. It's Hendrick's only Hyundai dealership.
"We're starting to get really, really good dealers that haven't been Hyundai dealers before coming in, buying franchises and paying good blue sky for a franchise," Zuchowski told Automotive News. "So now I don't add any more dealers. I get a good, experienced dealer in who gives us better facilities; he doubles sales, and I keep the same dealer count. It's a win-win situation."
Mark Johnson, president of MD Johnson Inc., a dealership buy-sell advisory firm in Seattle, said Hyundai dealerships are getting more attention from the big dealership groups because the upgraded product line allows dealers to make money on each new-vehicle sale.
Hyundai has moved the top end of its product lineup upmarket with such models as the $30,000-plus Genesis sedan and the upcoming Equus luxury car that will cost around $60,000.
Hyundai also has improved residual values. Hyundai was ranked as the No. 7 mainstream brand by ALG in its 2011 Residual Value Awards, Hyundai's highest rank ever and above the industry average.
Dealership groups have historically had little or no interest in Hyundai stores, Johnson said. That's because Hyundai dealers relied on selling low-priced cars below invoice to boost volume enough to earn stair-step incentive cash as a means to profitability.
"That model is something they [large dealers] wanted nothing to do with," Johnson said. "And now basically what you're seeing is, as Hyundai moves its product line up, you don't have to run the store that way to be profitable."