By on February 6, 2018

2018 Genesis G70 lineup - Image: Genesis

Late last month, Hyundai Motor America sent messages to dealers that announced the formation of an independent Genesis dealer network. The plan was to further separate the luxury brand from the rest of the company’s automotive fare by creating standalone dealerships.

While great for the brand’s image, the automaker’s strategy only calls for 100 initial locations. That’s a problem, because there are roughly 350 dealers that are currently eligible to sell both.

This hasn’t gone over well with Hyundai stores currently selling Genesis models right next to their more pedestrian inventory. Dealers have been offered compensation if they don’t make the cut, but plenty of them aren’t interested. They don’t want the money, they want the cars. 

The Genesis compensation plan is intended to reimburse Hyundai dealers who invested in inventory, training, and equipment to service Genesis products and help launch the brand. It also includes a settlement with offers that vary depending on sales volume.

For Keyes Hyundai in Van Nuys, California, that equates to roughly $5 million dollars for not selling Genesis-branded vehicles. But its general manager, Brian Sobel, explained to Automotive News that it would rather be part of the new dealer network, especially since it’s located in an area that’s targeted for sales. As the second-strongest Genesis retailer in the western region, odds are good Keyes will get to keep selling them. However, it’s still one of 350 stores eligible for the 100 initial spots.

That’s also true for Gregory Hyundai-Genesis in Highland Park, Illinois. Owner Gregory Mauro knows his store could lose the luxury brand but intends to put up a fight to keep it. “For a lot of dealers, it makes sense for them to take the buyout,” Mauro said. “For other dealers, it makes sense for them to move forward and build the brand … Being in a major market in a luxury area, it makes sense for me to move forward.”

Genesis Boutique Downtown Toronto Canada - Image: Hyundai Canada

Hyundai estimates around 500 dealerships currently selling models like the G80 will be phased out of the Genesis network entirely. Those that do get to stay will be required to build or renovate their facilities by the end of 2020 to create a separate space for the luxury models. No showroom space can be shared and dealerships have to meet specific sizing requirements. Erwin Raphael, Genesis’ general manager, said the company should start announcing the franchise recipients within the next few months.

“We’ve got an internal process to consider many variables, but mostly, we’re focusing on experience and their commitment to delivering the luxury customer experience,” Raphael said of the dealer selection strategy.

Sobel thinks Keyes can prove itself to Genesis. While many dealers — including Sobel and Mauro — have called the automaker’s proposed compensation plan fair, many feel it makes more sense to stick with Genesis. Keyes already has a facility near its Hyundai store that it feels it can revamp for a few million and has promised to create a high-end experience for customers.

“I think the Genesis brand will be able to take off in an environment that will enable them to excel with the clientele they have,” Sobel said. “I’ve got a $240,000-a-year customer coming in to buy a Genesis, sitting next to a customer who is hoping to get into a $10,000 brand-new car. They’re just different buyers.”

That split is the primary reason Hyundai wants to separate the showrooms. Raphael told Automotive News last year that customer clinics showed most buyers disliked the idea of shopping for a $60,000 luxury vehicle when it was situated right next to more affordable Hyundais.

Plenty of luxury brands have pursued a similar strategy of late. Lincoln is trying to create ultra-premium versions of its stores in select markets while Cadillac wants to revamp its entire network via Project Pinnacle. However, General Motors’ strategy left a lot of dealerships noncompliant and created a real mess. Hyundai America COO Brian Smith said the company wants to avoid that, adding that it worked very closely with its dealer council before launching the Genesis plan.

“That’s probably where we focused our efforts up until now … to make sure that as our launch strategy comes together that we’re getting good feedback from dealers, and we are,” Smith said. “We had multiple conference calls with them as we refined the program.”

[Images: Genesis Motors]

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28 Comments on “Top Hyundai Dealers Are Battling for a Slice of Genesis Pie...”


  • avatar
    volvo

    ““We’ve got an internal process to consider many variables, but mostly, we’re focusing on experience and their commitment to delivering the luxury customer experience,” Raphael said of the dealer selection strategy.”

    How the dealerships have treated customers in the past should be number one one on that internal process.

    I don’t own a Hyundai but I would imagine that like Toyota and many other brands every customer who purchases a car or service at a dealership gets a customer satisfaction card or email from Hyundai USA.

    I hope that data is weighted heavily when Hyundai is deciding who gets the Genesis stores.

    • 0 avatar
      Jack Denver

      That doesn’t really tell the whole story. The quote in the article about being seated next to someone hoping to qualify for a $10K vehicle is telling. That’s exactly what happened to me. My dealership treated everyone decently enough but the way you treat customers decently at Wal-Mart is different than the way you treat customers decently at Neiman Marcus. Because they are different customers with different needs and different standards and require a different sales approach and experience. There’s a reason why they don’t sell handmade Italian suits in Wal-Mart and why they don’t sell $5 T-shirts at Neiman Marcus.

  • avatar
    Sub-600

    Genesis is a nice ride, my neighbor has one. Available 500 hp V-8 as well. Buyers probably aren’t cross shopping these with Elantras.

  • avatar
    gasser

    I bought my Genesis from Keyes Hyundai. I have met Brian Sobel, he is a very pleasant young man. The total experience was first rate. I’ve had Mercedes and Lexus in the past too.
    The only thing that Keyes Hyundai needs to compete directly with the premium brands is a separate building and better donuts.

    • 0 avatar
      bd2

      From what I have heard, Keys has a higher/better level of service for Genesis buyers/owners than a nearby independent Genesis store.

      While facilities are nice, it’s really the people who make the difference.

  • avatar
    jh26036

    100 is an awfully low number to roll out. I thought Hyundai wants to sell these cars. People that can afford these type of cars don’t want to waste a bunch of their time driving out to a dealer to just service/buy them. Are they offering full concierge service to every customer? It really doesn’t look like Hyundai is giving themselves a chance here.

    • 0 avatar
      bd2

      While I agree that something more like 130-140 stores would be better in the long run, figure that the 100 is the goal for the “1st stage” (in order to ensure that the granted dealerships will be viable storefronts).

      In the short-term, G70, G80 and G90 sales will get hit hard as the plan is for ’19 models to only be available to Genesis dealerships.

      By the end of this year, only a portion of the 100 or so planned dealerships will be in operation.

    • 0 avatar
      Jack Denver

      I don’t know what they are going to do once they have the freestanding dealerships but as of now, starting with the 2017s they will pick up your vehicle for service so you never have to set foot in the dealership after the initial purchase. I suspect they will continue this because people aren’t going to want to drive 1/2 way across the state for an oil change.

      • 0 avatar
        bd2

        For basic maintenance like oil changes, can just go to a Hyundai dealership (there are Lexus owners who just go to a Toyota dealerships for an oil change – if closer and plus, it’s cheaper).

  • avatar
    Sceptic

    For the American customer historically Hyundai = bargain
    How is this push going to change that attitude? Fancy showrooms with fancy service, and subsequently higher prices are going to help push the product that is not bargain priced anymore? Why would a luxury buyer come to Genesis?

    Genesis should be a luxury “value” brand. They are not ready to compete head on with established brands.

    • 0 avatar
      volvo

      I believe that the Genesis is currently bargain priced.

      I looked briefly at the G80 V6 RWD specs. Very well equipped current MSRP roughly $42K.

      $40-45K in a German brand will get you a 4 cylinder, vinyl upholstery (called by a fancy name *-tex) electronically stripped 3 series or C series. The A4 might come in close to that price but the G80 looks like it is aimed at the 5/E/A6 series. Build and price those and you are looking at $55-70K.

      Currently only the Avalon seems to offer similar “luxury” at this price point.

      I will certainly drive a G80 when time comes for a new car.

    • 0 avatar
      ajla

      “Why would a luxury buyer come to Genesis?”

      More available cylinders for under $60k.

    • 0 avatar
      Jack Denver

      You could have said the exact same thing about Lexus when they first rolled out. The strategy is obvious – you lure the customers with low prices (BTW, Hyundai, not the dealer, bears the burden on this) while you build up the brand and later when you have established a reputation for high quality and impeccable service you can price accordingly. In the beginning, people bought Samsung phones because they were cheaper than Nokias or Motorolas but now people buy them because they are better and they can charge accordingly.

      In the meantime the cars are great bargains – I got a leftover 2016 Genesis for the price of a loaded Subaru Legacy.

      • 0 avatar
        Sceptic

        That’s great when local Hyundai dealer advertised Base Genesis G80 at $33k. But this new marketing policy will probably stop those kinds of fire sales? No? BTW those cheap Genesis deals were not that popular in the wealthy suburbs of Washington. Only had some success with retirees and the ghetto crowd.

  • avatar
    87 Morgan

    For starters, I think the 100 dealerships will be a good place to start. However, what I don’t see as viable is the product itself. The ‘flagship’ sedan ala LS460, S500, 740I, A8 really are not what they used to be.

    Asking a dealer to invest what will be a most likely several million dollars or more to build a new facility or facelift the one they have, which most likely was facelifts in the last 10 years anyway to only sell a handful luxo barges is a tough ask in my opinion.
    Perhaps when they are talking to the dealers they are showing them top secret classified info on SUV/CUV luxury offerings that will actually bring well healed buyers to their stores.

    • 0 avatar
      bd2

      There are 3 CUVs in development with the 1st (the GV80) set to launch in 2019.

      Likely will be a 4th CUV on a dedicated EV platform.

    • 0 avatar
      Jack Denver

      You heard the existing dealers – one guy (and not a stupid guy) would rather get the franchise and spend millions more to build it out than ACCEPT a $5 million check just to go away. That should tell you something. It should give you a hint about the long term profits to be made from having a luxury car franchise.

      They don’t need to show them super secret plans. Genesis WILL have a full lineup of SUV’s eventually and they will be good vehicles and attractively priced vs the competition for a comparably equipped vehicle – you can bet on it. Real people are betting millions of $ of real money on it.

      What people are missing about Genesis is that the Germans do ala carte pricing so if you price base model vs base model the gap doesn’t seem to be that big, but if you are talking about comparable equipped vehicles w. 6 or 8 cyl engine, the Genesis is a LOT less. Maybe the Genesis doesn’t have quite the handling of the BMW but 80% of the difference is just brand prestige and not inferior hardware.

  • avatar
    dougjp

    Limiting the number to 100 out of 350 tells me one of two things.

    (a) 250 of their existing “approved” Genesis sellers are pretty much useless and/or unqualified to meet the criteria.

    (b) They really don’t want to sell a decent volume of cars or establish the brand at more than a walking pace, for reasons not to be explained in English.

    ” as our launch strategy comes together ” pretty much says it all to me, and tells me “(b)” above is the answer. If they don’t even have a “launch strategy” figured out, and by the middle of last year, what’s been going on?

    • 0 avatar
      bd2

      The vast majority of luxury sales are within the major metro areas – where Genesis plans to have several stores (in each metro area).

      For the smaller cities, the current plan is to have only 1 store – which may drive off some potential sales due to distance, but at this juncture, Genesis wants to ensure viability of the dealerships.

      • 0 avatar
        ajla

        “which may drive off some potential sales due to distance”

        Well, back to hoping for a Stinger 5.0L.

        Are the Genesis cars still serviceable at any Hyundai dealer?

        • 0 avatar
          bd2

          Those purchased from Hyundai dealerships will continue to be able to be serviced at Hyundai dealerships (note – only 350 can sell/service the G90).

          But anything from the 2019MY and on will have to be serviced from a Genesis dealership when it comes to warranty work.

          Can still always got to a Hyundai dealership for basic service such as oil changes if one wants to save a buck (as some Lexus owners are known to do).

          • 0 avatar
            ajla

            “But anything from the 2019MY and on will have to be serviced from a Genesis dealership when it comes to warranty work.”

            Geez. That’s a kick to the shins. They should think about changing that rule.

            I guess the only nicer new vehicles people outside urban areas are supposed to own are King Ranch trucks.

  • avatar
    Dilrod

    Hi, I’m Different. May I please test drive an Accent?

    Seriously, if Genesis goes, what will Hyundai dealers offer as a “premium” model without sending a potential customer on their way? The Azera is gone. Limited trim lines are nice, but not THAT nice.

    If they are going to “upmarket” the Genesis, does that call for “downmarketing” the Hyundai (I know, nothing is more downmarket than a Hyundai ha ha)? Won’t they need to increase volume in sales of the cheapies to make up for the loss of the premium model?

    • 0 avatar
      bd2

      Doubt we’ll see the revival of the Azera (which is kinda a shame as the new Grandeur is much nicer than the last Azera).

      But the new “flagship” for Hyundai will be its much larger and more premium 3-row crossover (shocking, I know).

    • 0 avatar
      Jack Denver

      The Sonata is a nice vehicle and no less “premium” than the nicest sedan that you can buy at a Chevy or Ford dealership.

      • 0 avatar
        highdesertcat

        Years ago I favored the V6 Sonata as my rental-du-jour.

        Almost got a speeding ticket going up I-15 from I-8 in San Diego, CA before I realized I was doing 105mph. Ahhh yes. Sooooo smooth and solid.

        Motivated me to buy a brand new 2011 Elantra for my granddaughter’s HS grad.

        Between then and now, I don’t know WTF happened to Hyundai. Several friends are having problems with them.

        I know! I’m the one who gives then rides to the local dealership.

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