Genesis Making a Break for It

Most people didn’t see this coming, but Genesis Motors has been so successful that it may operate a standalone car brand separate from parent company Hyundai. It looks like Hyundai launched such a successful new product line that, like a teenager, it now wants a little distance and independence.

While there was some scuttlebutt that something like this would take place in a few years, the rapidity of the announcement has taken some observers by surprise. Hyundai only launched the Genesis brand in 2015. Before that, the first vehicle of the new brand (the Genesis G80) was sold as the Hyundai Genesis starting in 2008. The two brands have been tightly associated with each other to the extent that Genesis can be bought from a Hyundai dealership. Now, the automaker plans to separate their luxury marque from the Hyundai brand, launch standalone dealerships, and reduce the number of Hyundai dealers that can sell the Genesis. The manufacturer either has a huge amount of faith in the brand, or it has acknowledged that the Hyundai brand can no longer add value to Genesis and may, in fact, weaken the luxury car’s appeal – but that’s an argument for the marketing guys.

The reality is that this break is not going to go smoothly and might do significant damage to the company’s American dealer relationships. The claims that it needs to get rid of the dealers that it thinks can’t do the job so that the rest of the dealers can be more profitable. At first, Hyundai (which has approximately 835 dealerships across the country) let almost anyone who wanted to sell the Genesis operate a “showroom-in-a-showroom” to sell the luxury brand. 352 dealers agreed to carry the G80 and G90 sedan and had to create a separate space for them in their dealership footprint. Now instead of a store within a store, Hyundai wants to prioritize standalone dealer entities. Hyundai dealers will have to apply to become a Genesis authorized dealerships, which isn’t sitting very well with some American dealers, owing ostensibly to the fact that many of these dealers were counting on the luxury warranty work that the corporation pays as a subsidy to their revenue streams. This promises to be a pretty ugly scenario as the company has hired lawyers and consultants to try and make sure that they can get out of their dealer agreements with as little damage as possible.

All this is happening at a very curious time when you think about how car sales, and sedans in particular, are in a deep dive, and many American consumers are shifting to crossovers, SUVS, and light trucks. Hyundai believes that a new luxury marque can still compete for high-end customers but that it needs to differentiate their new brand quickly – even if it makes dealers unhappy.