Is Genesis Trying to Starve Their Weak Dealers? Opinion...
Ever since the luxury wing of Hyundai was spun off into a separate brand in 2017, there were plans in place to ensure that only the top producing dealers would have the privilege of selling those new high line vehicles.
Genesis originally wanted a total of 100 dealers nationwide in affluent parts of the US to push these new highly spec'd, and aggressively priced automobiles onto American roads to get the right type of attention and pound it's proverbial chest.
The Message: We're here to exude class and chew bubble gum, and we're all out of bubble gum.
King Kong Genesis, climbed to the top of the Empire State Building of automotive reports. Suddenly giants like Motor Trend, Forbes and Automobile Magazine were reporting the intended plans of the fledgling brand to provide upper crust vehicles to upper crust clients.
Sounds promising, right?
WRONG! Some people hated that idea. Those "some" being most of the lower volume Hyundai and prospective Genesis Dealers. Dealers that sold the Hyundai Equus and the Hyundai Genesis. Two vehicles that laid the foundation that the newly formed Genesis brand was built on.
Instead of alienating a majority of average dealers, Genesis reversed course.
This sudden change would allow any Hyundai dealers to sell the Genesis line. The thought behind it all seemed to be that the more exposure to the market Genesis managed to get, the better it would be.
If Mitt Romney is to be believed, Corporations are people too.
Just like people do with their children, Genesis wants to show fairness to their dealers. As of this writing, they are still allowing any franchise owner who wants to sell the G70s, G80s, and G90s to do so. That way the winged brand can claim that they gave no preferential treatment.
Or can they?
Enter the GV80
Just because Hyundai dealerships can buy and sell Genesis cars, DOES NOT necessarily mean they can get the ones they want.
Early in November 2019, Genesis dealers received the outline on how the brand's first SUV will be released to the public, and what part dealers will be allowed to play.
The internal memo outlines how the amount of the initial allocation of GV80s will be determined. It will be determined by two metrics.
90% of the total calculation will be determined by the dealers themselves. Genesis will take into consideration not just the amount of vehicles sold within the last 180 days, but will also give certain weights to the models those dealers have sold.
G70 will be 15%, the G80 will be 50% and the G90 will be 35%
The remaining 10% will be calculated by the segment potential of SUVs in the market that the dealers are in.
Is This a Set Up?
The biggest percentage of weight is being given to the G80. Keep in mind that the lease special on the G80 isn't that convincing when compared to established luxury vehicles. Being that 41% of US customers in 2019 visited only one dealership when shopping for a car, the dealers with the bigger inventories would have the edge when compared to smaller dealers. Even if the smaller dealers do get the foot traffic, once those initial Genesis SUVs are sold they are at the mercy of the Genesis distribution network. A network that will still have an entire country's worth of Genesis dealers to supply.
Is Genesis Being Fair?
Well to be fair, the outline is only for the initial allocation. But still...
...fair is relative. If Genesis sent equal number of vehicles to all their dealers, that could possibly resolve the issue of smaller dealers not having equal representation in their specific area of operations.
On the other hand, the case can be made that the equal number of units split throughout the unequal SUV markets around the country would be unfair to those successful stores who have a much bigger pool of past customers. Many of which will be loyal Genesis clients. Clients that have choices when it comes time to purchasing or leasing a luxury vehicle. Would be a shame of Genesis had a repeat of the G70 launch with the GV80.
Logic would dictate that the Dealers which move more units would get more inventory. The more units sold, the more a dealer will get paid in kickbacks from the factory. Scaling up the sales would mean that the kickbacks from Genesis to the dealer would be more substantial. More substantial kickbacks mean that dealers who sell more would units be able to give more discounts to prospective owners. Discounts that smaller dealers would be hard pressed to match when all is said and done. Discouraged dealers with aging inventory and rising floor plan costs to consider may just blow out any Genesis for hefty discounts on any vehicle they have left. Thus, hurting resale value for the brand and increasing depreciation percentages on a manufacturer who is attempting to gain a footing and respect in the luxury world.
Time to Rip Off the Band-aid
It's not a question that Genesis wants to be taken serious. Surely they do. The question is, should everyone that wants a Genesis franchise be allowed to have one? Considering that the South Korean luxury brand has to contend with their German and Japanese peers, do they really want to water down that luxury expectation with dealers who cannot compete at the highest capacity?
Looking beyond the financial aspect, customers expect a certain treatment with their purchase experience as well. Lexus, Mercedes, BMW and Porsche have decades of experience perfecting the ambiance of their dealers. Entire training modules are dedicated on proper etiquette. How to understand the needs of the clients. How to present a vehicle. Even what words should be used during the sales process.
If Genesis would have stuck with their original idea everything would nearly be in place to transition to stand alone dealerships. A more streamlined sales process would also help make purchasing a new vehicle more efficient. A bigger concentration of inventory will aid in the decision making process due to more options for the buyers.
Finally, the missing ingredient would be the ambiance. Something that right now is a complete joke with nearly every Hyundai/ Genesis showroom. How can anyone who is considering spending north of $70,000 for a flagship vehicle feel that they are about to take home something truly exceptional when ten feet away there are people haggling over the price of a base model Accent?
With the introduction of the GV80 into the highways and byways of the US in the near future, Genesis has taken an important step in the right direction. Hopefully they will be very successful when their complete model line is released by 2021 or 2022.
Let's just hope that their vision for a value driven luxury brand isn't tainted by their attempted inclusion of dealerships that would have had trouble making the cut in the first place.