The Future of Luxury Car Sales: Hyundai to Limit Genesis Dealers

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South Korean car company Hyundai has divided its dealerships into two groups. One will sell its new Genesis luxury brand. The other will not.

As luxury car companies try to differential their sales and service from those of less expensive vehicles, the division segregation like at Hyundai may happen more and more often.

According to Automotive News:

Hyundai plans to give some of its 350 elite-level dealers the first chance to apply for stand-alone Genesis franchises and is preparing compensation packages for dealers that have carried Genesis products but are being cut off from the luxury brand.

Dealers have to set up the equivalent of mini-dealerships to sell Genesis models.

General Motors Co.’s (NYSE: GM) Cadillac was rumored to begin to prune its dealer network in 2015, but the decision was shelved. Whether manufacturers GM and Ford Motor Co. (NYSE: F) might completely spin out Lincoln and Cadillac dealers from those that sell nonluxury brands may depend in part on the Hyundai experiment. BMW, Mercedes and Audi have the benefit that their sales and service operations are not generally married to those of less expensive cars.

Genesis already has its own website, separate from Hyundai. It highlights its G90, G80 and G80 Sport products. Genesis has not been able to compete with major luxury brands, perhaps because its lineup is small. The lack of awareness of the brand may be another reason.

Genesis offers luxury cars at the low end of the market, which also may hurt its brand. Its dealer network faces that hurdle. The G80’s base price is $41,750. The G90’s base price is $68,350. Like Cadillac and Lincoln, Genesis does not have high-end sedans or sports cars. And it has no sport utility vehicle or crossover at all.

Some Hyundai dealers will be left out of sales and servicing of the Genesis brand. However, marking and selling the brand may be very difficult. Setting up mini-dealerships has to be expensive as well. This means the investment in the new brand may not be worth it.