It’s never a good feeling when you wake up to news that immediately raises your eyebrows. But that’s exactly what happened earlier this morning when I clicked an alert on my phone about Genesis’ decision to separate from Hyundai long before it intended to. Apparently, the news is legitimate, too, because according to Automotive News, Hyundai’s two-year old luxury brand is all set to introduce a new retail strategy in the U.S. that will “accelerate” its separation from Hyundai, thus cutting down the number of Hyundai dealerships that are authorized to sell Genesis models.
The play at independence is surprising, not because Genesis wants to do it (there were already plans for it) but because the initial plan called for this separation to happen two or three years down the road. Instead, it could happen as early as next year even though the current dealership setup between the two brands is still itself a work-in-progress. Neither Hyundai nor Genesis have provided details on how Genesis plans to establish its own dealership network, but it is telling that Genesis’ decision may have some half-baked elements to it when its own general manager, Erwin Raphael, admits to Auto News that the company has to make “very difficult decisions in the short run in order to ensure that we take care of our... dealers in the long run.” However this story unfolds, it’s clear that this is not what Hyundai intended when it decided to launch a sub-brand that will provide its customers a distinct lineup of luxury vehicles in the mold of Lexus and Infiniti.
Continue after the jump to read the full story.
Why is this an issue for Hyundai and Genesis?
There are multiple reasons why Genesis separating from Hyundai much sooner than expected could have negative effects on either of the two companies.
First, the timing seems to be rushed, especially when you consider that Genesis is barely two years old and the two models that it already has in the market – the G80 and G90 sedans – are barely a year old each. Add that to the looming launch of the G70 sedan and plans to develop a three-model SUV lineup that will now include a compact crossover, and it’s easy to see Genesis having far too many things on its plate to deal with. Can it juggle doing all these things at the same time? Perhaps. But don’t expect it to be smooth sailing because even if it did have the resources and the manpower to work on all of these items simultaneously, the company is already going to run the risk of spreading itself too thin.
Here’s the thing, though: even that is unlikely to be Genesis’ biggest problem moving forward. The issue of spurned dealerships could turn into an even bigger headache, especially after Louisiana forced Hyundai to ground all Genesis sales on allegations the dealerships that were selling them didn’t have the proper licenses to sell the models under the Genesis brand. This event was reportedly the catalyst that spurred Genesis to accelerate its independence from Hyundai, largely because it wants to have its own dealership network set in place as soon as possible. The intention here is actually right because it’s going to be difficult for Genesis models to create an identity for themselves if they have to deal with the looming shadow cast by Hyundai in all of its dealerships.
But the decision to accelerate its release from Hyundai will come at a cost, particularly goodwill from dealerships who were asked to make renovations to their stores and hire more employees to accommodate the Genesis models, only for these dealers to be put in a position to scale back on the Genesis business because the company suddenly had an about-face on its own long-term plans.
I can’t predict what’s going to come out of this, but I do think that this could get messy really quickly. It’s for that reason that Genesis has reportedly retained outside legal counsel to help get itself out of the mess it created.
References
Genesis G70
Read our speculative review on the Genesis G70.
Genesis G80
Read our speculative review on the Genesis G80.
Genesis G90
Read our speculative review on the Genesis G90.