Top Hyundai Dealers Are Battling for a Slice of Genesis Pie

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.”

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]