Genesis dealers: New EVs boosting sales

Genesis tripled sales last year to 49,621 on the strength of its new GV70 and GV80 crossovers. The Korean upstart was named the best premium nameplate in the J.D. Power dependability study. And after years of struggling with U.S. distribution out of Hyundai dealerships, it's heading down an independent path.

"Genesis' time is here, and it seems to be getting all of the needed support that the Genesis dealers could really hope for," said Peter Lanzavecchia, 66, chairman of the Genesis National Dealer Advisory Council and owner of Genesis of Cherry Hill in Marlton, N.J.

Parent company Hyundai Motor Group prioritized the young brand during its growth spurt over the past 16 months, when Genesis finally had the vehicles and marketing to reach the next level. Last year's sales were just 8,932 shy of Infiniti, which is three decades old compared with just 6 years old for Genesis.

While Lanzavecchia doesn't expect the same level of growth this year, he does expect upwards of 20 percent as Hyundai Motor Group continues to give its premium brand priority for semiconductor chips. Genesis will also launch its first two electric vehicles this year, the GV60 and Electrified G80.

Lanzavecchia spoke with Staff Reporter Laurence Iliff. Here are edited excerpts.

Q: Genesis is growing fast, with hot new vehicles that many U.S. consumers are just learning about. Are you concerned that the aggressive pivot to EVs will confuse buyers just getting to know Genesis' internal-combustion vehicles?

A: No, not at all. Actually, we have seen a tremendous increase in the brand's recognition and awareness. And that leads to higher levels of consideration. In 2021, I think that was partly due to [COO] Claudia Marquez's update to our Tier 1 advertising strategy and funding. That really seemed to come on strong in the fourth quarter. Every brand, certainly every premium brand, has announced the transition to EV, so we are looking forward to Genesis continuing its leadership in design and tech and safety with our EV entries as we transition away from ICE models. We're not concerned. We're thrilled with the level of acceptance and desire for our models, and we think we'll see the same or even greater demand for our EV models once they're launched.

Genesis will soon have its first EVs with the GV60 and the Electrified G80, which are potential competitors for the Tesla Model Y and Model S. How do you see that competition?

New Jersey, I think, has four Tesla retail locations and one of them is in Cherry Hill. They do very well. We see shoppers from time to time looking at Genesis while also shopping Tesla. We've had more than a handful of trade-ins from Teslas. There's a little bit of concern in the Tesla owner community with the service. Where to go for service if they don't live near a Tesla location. We welcome the competition. Tesla is a great car, great brand. They've done a great job paving the way, really by creating the charging infrastructure.

Has Genesis developed a road map that will guide dealers during the EV transition?

For sure. The retailers have been given the road map, the announcement, that there will be no new ICE launches after 2025 and no new ICE production after 2030. Our whole industry has committed to eliminating tailpipe emissions. So every OEM, of course, is now trying to fast track. It seems like whatever announcements were made six months ago about BEV investments are being increased in terms of both timing and financial commitment.

How do dealers feel about the transition timeline?

We've seen in Hyundai Motor Group's Strategy 2025 document that electrification is a massive priority for the parent company for all the brands, and we're very excited about how we are going to prepare for EVs.

All of the dealers have been given the blueprint not only for the charging infrastructure that dealers will require as they build their Genesis exclusive facilities, but we've been given a future-proof document and design of how to expand that EV charging infrastructure both inside the facility and on the property as we transition more models post-2025.

Do you think dealers would like to see hybrids as a transition, even though Genesis has committed to going straight from ICE to full EVs?

No, I think dealers are ready for BEVs. We're seeing a lot of acceptance for plug-in hybrids on our Hyundai side and I think you'll see continued leadership on those from the Hyundai brand. But where we're going with Genesis in the premium segments is full battery-electric vehicles. And of course, there is the whole specter of hydrogen that's looming out there, but the charging structure for that is much further behind that for electric vehicles. So, it looks like the big push for us will be into 100 percent EV. Government incentives and mandates have a lot to do with the speed and the acceptance from the buying public short-term until the costs become more at parity [with ICE]. But currently, we are anticipating a very high level of demand for our first electric sport-utility, the GV60.

Prior to the end of Genesis ICE launches in 2025, what would dealers like to see on the internal-combustion side?

As you know, we started Genesis with a sedan and then more sedans — the G70, G80, G90. With the introduction of our SUVs, we've kind of got the sweet spot of both the sedan and the SUV segments covered now. We're in the highest volume segments.

I hear industry analysts say that a GV90 large crossover is a logical one. What do dealers want?

There has been some talk of a GV90, and I think dealers would be happy to get an additional, larger SUV. But if you look over at BMW, I don't know if their X7 volume is really that meaningful compared to X5 and X3. So, we're right where we want to be in terms of the highest-volume offerings. And we think the redesigned G90 sedan, which is out this year, is really going to establish that model as our true flagship. We've all seen the early reviews on that vehicle and it really is a true game-changer in that large premium sedan segment.

What's the latest update on the Keystone facility program and the construction of standalone Genesis stores?

I think you and I have talked about this for three years now, and probably even as recently as last year there was still some concern out there in the retail network about the Keystone program. There's no question at this point as we sit here today that [separate] exclusive stores for Genesis and Hyundai is really the only way dealers are going to maximize success with those two brands.

What are the next steps in the Keystone process?

There's really two pieces: the dealer network topic and the facility topic, and they are certainly interrelated. The Genesis Motor America leadership team and the retail advisory board are in total alignment on reducing the current size of the retailer network. The difficult part becomes in executing that. It's actually beginning to pick up some momentum. There were more voluntary terminations in the fourth quarter than there had been prior. And we're coming up on some deadlines.

What about separating Hyundai stores from Genesis sales?

We're currently in a grace period where cohabitation with Genesis is permitted, but that will expire. And that will really force the issue for many retailers to find a location to move their Genesis business — to an exclusive facility or an adaptive exclusive with some shared service back at their Hyundai dealership. Or to resign the Genesis franchise if their market or their business plans really don't support expanding that. More and more retailers understand that engaging in the Keystone program and pursuing achievement of all the Keystone metrics is the path to maximizing their success as a Genesis retailer.

This year, you'll have the G70, G80, G90 sedans and the Electrified G80 when it arrives. Will Genesis have too many sedans?

The sedan business has been very, very successful for Genesis retailers. It makes up a solid third of our volume. What we find especially in the G80 and the G90 segments, where there are less entries, is that those two are achieving some remarkable segment shares. It's not uncommon if you look at a primary market area of a successful Genesis retailer to find that the G80 and the G90 have moved up to No. 2 in those segments.

Have you seen customer interest yet in the coming Genesis EVs?

In our digital retailing center, we have a waitlist developed for electric Genesis models, both the SUV and the sedan. What's happened with the EV segments is that it's no longer, "Oh, I want a green car." Customers want to have the user experience that is now available in the EVs, which in many cases is superior to the user experience that they have become accustomed to in their ICE vehicles. Genesis is a design brand and we anticipate continued innovation and leadership in our EV designs. And we think that with the launch of the GV60 we are going to stake our claim that Genesis is a leader in the premium EV SUV segment.

How have Genesis dealers adapted to tight inventories?

Like every brand, Genesis retailers updated their strategies in 2021, especially in the second half of the year when ground stock really became very, very tight. Much more accomplishment in digital retailing and pipeline sales. All of our production is offshore. We don't have any domestically produced models for Genesis, so the in-transit times for all of our models is much longer than any of the competitors that have a North American plant. So, we've really had to work closely with Genesis Motor America and we're still prioritizing better estimated time of arrival from our transportation company, so we can give the client a better idea of when a particular model they are interested in will be arriving. And then once that client purchases that pipeline unit, we need to be able to give accurate, reliable updates on the estimated time of arrival of that unit.

Do you think there are any lessons learned for inventory levels going forward?

A little scarcity is not a bad thing in our industry. And we hope that all the OEMs have kind of learned the lesson that overproduction and having inventory chasing customers is not as good as having a bunch of customers chasing inventory. We have very short memories in this industry, so I don't suspect we'll remember all of the positives of some of the scarcity that's been introduced into our industry.

How sustainable are current vehicle margin and profitability levels as inventory levels improve?

For a lot of dealers I talk to, and even for us, our Genesis business is our most profitable brand in terms of return on sales. It's very efficient. Part of that is because it's sharing space in the Hyundai facility. So, it doesn't yet have the full expense structure that it will have the day it moves into its exclusive facility.

Genesis profitability is at all-time record levels. Our return on sales for Genesis is probably where Porsche and Mercedes-Benz have aspired to over the years. The keyword is sustainability. We're working with Genesis leadership on the dealer profitability profile in exclusive facilities, particularly in fixed operations. Not only is the transition to EV rapid, but we don't have decades of internal combustion-engine sales that will leave us with a high quantity of ICE vehicles to service in our shops. We will not have the same profile on service and parts gross profit that Lexus, BMW, Mercedes and Audi have. So, we've addressed that with Genesis Motor America and we're looking for additional support for all the departments in a Genesis standalone facility as a result.