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.
The compensation packages are intended to take care of those Hyundai dealers who invested in inventory, training and equipment to service the products and helped put the brand on the map, said Erwin Raphael, Genesis general manager.
"Some of these dealers have spent hard costs in the last year," Raphael told Automotive News on Friday. "We would reimburse them those costs. If they request us to buy the vehicles back for whatever, we'll buy those back and make them whole. Same with parts and accessories, special tools. We're not going to leave the dealers with any baggage."
Raphael said the stand-alone Genesis network would have around 100 stores in 48 markets across the U.S. The locations include Chicago, Los Angeles, New York, Miami, Washington, D.C., and San Francisco. Thirty of the markets will have just a single point.
It's a steep drawdown from the 350 stores that are now eligible to sell both the G80 and G90 luxury sedans under the Genesis Participation Agreement, which required dealers to set up a discrete Genesis showroom within their Hyundai stores. Of those 350 stores, the ones in the selected markets will get a chance to apply for the stand-alone locations. Dealers outside the Hyundai Motor America network have shown interest as well, but Genesis says they'll be put in a holding pattern for now.
Nearly 500 other Hyundai stores carry just the G80 alongside their Hyundai-branded products and will be phased out of the Genesis network. (The G80 was formerly sold as the Hyundai Genesis.)
Raphael expects to begin announcing the franchise recipients in the next few months. Dealers who are awarded franchises will have to build their facilities by the end of 2020. They must be operational on Jan. 1, 2021.
Some stores, he said, will be prepared to open this year.
Only the new dealerships will get the 2019 model year products, which are expected to include the G70 sport sedan. Raphael said 2019 models will be serviced exclusively by those stores.
"The distribution network model where we're selling luxury cars through 840 Hyundai dealerships that are mainstream dealerships just doesn't work," Raphael said. "Luxury customers are looking for a different experience. That's really the driving force."