“We do in fact have to expedite our process of separating our brands.”
– Genesis Motors General Manager Erwin Raphael
From the start, Hyundai Motor America’s plans to launch its upmarket Genesis brand inside Hyundai showrooms was easy to question. Do consumers want the link between a $68,100 Genesis G90 and a $14,745 Hyundai Accent to be so obvious?
Of course not. But affording Genesis a mere corner of certain Hyundai showrooms wasn’t the only problem — Genesis general manager Erwin Raphael also had issues early on with the number of Hyundai dealers signed up to sell the Genesis brand.
“We may see that (350) figure go down,” Raphael said in November 2016, only a few months after the brand began selling cars in America. “I think it is too high.”
Fast forward to August 2017 and Hyundai’s plan to eventually separate the Genesis brand with standalone showrooms, perhaps in 2020, is about to be pulled way forward. “For this brand to really survive and thrive,” Raphael tells Automotive News, “and for us to develop the culture within ourselves and within our dealer network to support and take care of these customers, we do in fact have to expedite our process of separating our brands.”
So what happens to all of those Hyundai dealers who recently spent thousands renovating showrooms to include Genesis studios?
Dealers have not yet been told.
Andrew DiFeo, Hyundai’s National Dealer Council chairman, says the way in which Genesis was launched may have represented, “the easiest, least-painful route in the short term.” Yet after 352 dealers invested heavily in the future of Genesis, choosing the easy way forward “affected the brand negatively in the long term,” DiFeo says.The entire launch process of the Genesis brand was questionable. First, Hyundai launched its luxury sedan in late 2008 as a Hyundai, rather than as a separate entity. At the time, Hyundai considered the cost of developing the car ($500 million) and its Tau V8 engine ($250 million) pricey enough — launching a brand was thought to be a $2.5 billion, 13-year effort.
Hyundai followed up the Genesis with an even pricier luxury car, the Equus, but once again marketed the car as a Hyundai. Then, seemingly doubling down on Genesis’ status inside the Hyundai family, Hyundai launched a second-generation of the Genesis sedan for the 2014 model year as a Hyundai.
Then, as if to suggest the earlier decision to avoid the massive cash infusion necessary to launch a new luxury brand was a poor one, Hyundai launched the Genesis brand in America in 2016 without an entry-level vehicle, without an SUV, without separate showrooms, and did so inside Hyundai dealers.
In fact, the picture is even more muddied than that. All 835 of Hyundai’s U.S. dealers are permitted to sell the G80, Automotive News reports, but any of those dealers who wish to sell the further-upscale G90 must build the Genesis showroom inside their Hyundai store.
The lack of prestige is problematic. So too is the fact that being a dealer for a fledgling premium brand means hardly selling any vehicles: fewer than 5 per month for the average Genesis dealer.Such poor throughput is no recipe for success at the franchise level, and without successful dealers, Genesis will quickly lose ground before it can even fill its product lineup.
“We don’t see a path forward without a good, strong dealer network that’s also profitable. And we sometimes have to make very difficult decisions in the short run,” Genesis boss Raphel says, “in order to ensure that we take care of our dealers in the long run.”
The G80-only dealers — remember, these were dealers who previously sold this very car when it was the second-generation Genesis — were originally intended to be pushed out of the process once the third-gen model rolled around and Hyundai began to separate the two brands with separate spaces. But it’s clearly becoming obvious to Genesis that brand perception, in mid-2017, is not where it needs to be.
Pulling plans forward will be costly. Hyundai Motor America needs its current Genesis dealer agreements to disappear, which will require outside legal counsel to achieve.
Perhaps there are dealers that, outside of wasting money, will be relieved at the loss of Genesis-oriented responsibility. After all, there’s been little return on their investment to date. Genesis brand sales totalled 11,563 units in the first seven months of 2017, or about the number of C-Class sedans, coupes, and convertibles Mercedes-Benz sells every seven or eight weeks. But the Genesis G70, an intended rival for that C-Class, is due at dealers next year, and an SUV is set to follow. Both products are expected to outsell Genesis’ current duo.
Hyundai announced the formation of the Genesis luxury brand less than two years ago and the sales arrangement was quickly formulated for a U.S. launch one year ago. Hyundai’s desire to extricate Genesis products from Hyundai showrooms is the latest rapid-fire decision, one that should produce a proper plan by the summer of 2018.