LOS ANGELES — Despite lingering tension over the impending split of the Genesis and Hyundai retail networks, dealers understand that for Genesis to be profitable, it can have only a limited number of stores.
That's according to Brian Smith, who joined Hyundai Motor America in October as its first COO since 2007. Smith confirmed to Automotive News that Genesis is aiming for just 85 to 90 stand-alone stores next year, some of which could be awarded to dealers outside the current Hyundai network.
"The dealers are very aware of the fact that in some markets, there may not be a Hyundai dealer who wants to build a stand-alone, separate facility with significant customer service amenities that are required in a luxury brand," Smith said on the sidelines of the Los Angeles Auto Show last month.
Hyundai Motor America plans to tell dealers by year end which markets it has designated for stand-alone Genesis stores, Smith said. The automaker will begin selecting dealers at that time, with that initial expectation of 85 to 90 stores.
"It could grow beyond that, or it may be that we find out that we're servicing the market really well at 85 to 90," Smith said.
Regardless, the ultimate number will be considerably lower than the roughly 350 Hyundai outlets that currently sell Genesis vehicles.
Squaring those numbers has been a contentious issue, one that came to a head at a dealer council meeting in Dallas in November. Dealers briefly walked out of discussions with brand executives amid frustration with the decision to open Genesis points to non-Hyundai dealers. They eventually rejoined the meeting, which continued as planned, sources told Automotive News.
"It was a day and a half of a great discussion on all of the concerns they had, all of the things they were able to address," Smith said. "The Genesis bit was the one piece that ended up getting talked about for obvious reasons, and it wasn't even all negative."
The automaker also must make a decision on another key tension point: whether Hyundai dealers who sold Genesis vehicles in the past — some of whom invested in special showroom improvements — will be allowed to service them in the future and participate in that revenue stream.
The arrival next spring of the Genesis G70 — the first new product designed specifically for the Genesis brand and one with significant volume and profitability implications for the automaker and its retailers — has Hyundai Motor America feeling the heat to reach a quick resolution, Smith conceded.
"It would be nice," Smith said. "I think we'd like to have stand-alone facilities that are available when the launch of the Genesis brand happens [with the G70], but you know we'll probably have to make some exceptions along the way."
Smith says one of the key reasons he was attracted to the automaker after 35 years with Toyota and Lexus was the strength of the Hyundai and Genesis products due in the coming years.
That includes a spate of new and redesigned crossovers, the launch of Hyundai's N performance brand and the expansion of the Genesis line into crossovers. The new-product onslaught will help resolve many of the other issues facing the automaker, Smith said, particularly sales growth, profitability and vehicle supply more closely matching demand.