Will Genesis Luxury Brand Destroy Hyundai in the US?

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South Korean car company Hyundai has told the majority of its car dealers that they cannot participate in the company’s most important advance forward. The manufacturer’s high-end luxury brand, Genesis, a sort of BMW and Mercedes killer, will only be sold at 100 dealers. So, about 750 dealers will be left out in the cold selling Hyundai’s low-priced, high gas mileage cars.

Hyundai’s decision makes financial sense. Why should it ship Genesis inventory to dealers in areas outside the largest cities in the United States, which are the heart of the luxury car buyer market, particularly on the two coasts?¬†However, luxury cars usually have high margins. The limits Hyundai has put on Genesis dealerships may make many of the Hyundai locations much less profitable than they could be.

Automotive News reports that Brian Smith, the chief operating officer of Hyundai Motor America, said:

We’re trying to be clear that the first wave of where would Genesis launch as stand-alone facilities is the first wave. There are going to need to be more dealerships added over time to cover geography, to do the right thing for customers. Dealer profitability is a huge, important factor. For any manufacturer, especially luxury manufacturers, the dealers have to be profitable to give great customer service.

The dealers are less likely to be profitable if they cannot sell the Genesis brand.

Even for dealers who can carry Genesis cars, the model lineup is very limited, which will make it hard to compete with the mainline luxury brands, even smaller ones like Cadillac and Lincoln. The three Genesis cars that will be sold in the limited number of dealerships are the G90, G80 and G80 Sport. The G90 is the top of the line and means to compete with other large luxury sedans. The base price of the car is $68,350. Like most luxury car companies, Genesis has a lower end car. The G80 sedan has a base price of $41,750 and competes with a large number of small luxury cars at the same price point. The G80 Sport has a more powerful engine and several other sports car options.

Hyundai has snatched an opportunity from many of its dealers. However, the Genesis product line is so small that carrying it may not be much of a prize.

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