How are Genesis Dealers Dealing with Inventory Constraints?
It’s case by case. We still have fairly aggressive sales targets, and many of the pricing opportunities some dealers have spotted in the first half of 2022 are starting to shift. Some discounts are entrenched on certain models to keep up the speed and avoid building up above ground inventory. The last thing dealers want to do is build up ground inventory and lose future allocations.
It’s really about pre-selling the pipeline. The goal is to sell 35% of his entire pipeline before it reaches dealers. As a national network, we can say that we are close to achieving that goal. Selling a vehicle that has just left Korea by ship requires special skills and relationships.
Is selling 35% of the pipeline a new requirement or has it always been the Genesis way?
It became a must once the ground stock ran out. [caused by] Not enough chips. Genesis and Hyundai are better at managing chip shortages than most other OEMs. Many OEMs have canceled chip orders, but Genesis decided to continue processing orders early in his COVID. I think it had the least negative impact on production. That’s why both Hyundai and Genesis are gaining so much share. As demand increased and production was hampered (despite their best efforts), pipeline pre-sales became an important part of Genesis’ sales operations.
What kind of support did Genesis provide to get dealers during a period of low inventory?
Flexibility. Since Genesis is a valet service brand, the retailer needs a large fleet of rental vehicles. [Initially] The dealer places the vehicle in a loan vehicle and [between the time] The service team left on Friday and returned on Monday. Half were sold because there was nothing around. Genesis understood that.
We have set very clear targets for the number of service vehicles and the percentage of free maintenance that we need to provide through Valet Service, but a shortage of loaner vehicles means we will not be able to meet some of these benchmarks. It was very difficult, so Genesis relaxed some of these strict standards.
How does Genesis solve the vehicle affordability problem?
In the environment of rising interest rates seen in the second half of the year [of 2022], more Genesis clients were paying cash. Genesis has wealthy clients, but many clients are still financing or leasing several models, such as the G70 and G80 sedans and the GV70 crossover. Affordable payments are important because they want it. The fourth quarter saw modest support from some subsidized rates and leasing support for models with real buyers of payments.
How are Genesis dealers performing in terms of profitability?
I review Genesis’ composite financial statements from time to time and they show a very high return on sales. However, the need to put an asterisk on the record books for 2022 is because, with the exception of a few locations, Genesis still operates as a temporary add-on to the Hyundai business, with a minimal incremental cost structure and many For many dealers, and for our group, it is the highest profitable brand from the profit margin metric. identified retailer profitability in purpose-built facilities as a top priority for us. Because as soon as retailers move into these $10 million or $15 million facilities with the ability to really share these rent factors, dedicated staff and whatnot, it’s probably a back office operation and an expense structure. changes dramatically. So yes, profits are off the charts and 2022 will certainly outperform 2021, a record year, but this should be asterisked.
What are Genesys’ plans to accelerate leasing in 2023 after leasing volumes have declined across the industry?
Leasing is a key component of customer retention and a key component of a retailer’s profitability. We are understandably very concerned about the significant decline across the industry and Genesis’ leasing penetration.
We have a subcommittee that meets regularly with Genesys finance leaders, and the number one topic is leasing penetration. We know that leasing support is expensive, but a high level of leasing penetration is also necessary for the long-term health of retailers.
Genesis will lead Hyundai Motor Group’s transition to all-electric, and dealers will need to help educate consumers as the EV landscape develops. Is there pressure on dealers to do it right?
A misconception among most consumers who have never owned an EV is that EVs do not require maintenance, which is not true. I think many service team members also think that EVs don’t need maintenance. Genesis provided additional training on the sales side, but it is also required on the service side.
Genesis has set the EV customer satisfaction measurement very sharply apart from the non-EV. It’s on our dashboard and we see it every day. And you get an early read on how our team is doing in both sales and service. It will be of value to us.
Did the GV60 meet or exceed expectations? Will that help position Genesis as a premium EV brand?
The short answer is yes. Genesis is launching his EV in phases. Starting in California, New Jersey, New York and Connecticut, it has expanded to Arizona, Nevada, Utah and Washington.
The GV60 is an all-new platform that has been very well received by EV shoppers. Genesis retailers believe that the key to establishing our brand as a luxury EV brand is the continued launch of these cutting-edge EVs. The Genesis design team believes they are leaders in EV design, not only in sheet metal, powertrain and battery, but also in interior and customer interface experiences.
Are dealers eager for Genesis to expand quotas beyond eight states?
yes and no. Expanding our EV distribution reach is critical to our transition to a full EV brand. However, the dealer also recognizes that there are hot spots, warm spots and cold spots for his EV customer acceptance across the country. Some dealers are a little concerned about the Genesis’ rapid transition, knowing there aren’t many EV registrations on the market.
We firmly believe that customer demand is the driving force behind almost everything, and government mandates sometimes fall off target.
How does the electric version of the GV70 complete the Genesis lineup?
Looking at the sales rate and popularity of the GV60, [Electrified] The sales potential of the GV70 exceeds that of the GV60. It’s in the bigger segment, it’s a bigger vehicle.The GV60 has all the tech and amazing safety and performance characteristics, but it’s a little smaller for some of our clients.So the electric GV70 is our product. I think it will be a big step in my journey.
The Inflation Reduction Act will make imported EVs ineligible for the $7,500 federal tax credit, with more complex barriers coming in 2023. As the Genesis approaches his 2025, are dealers worried about how this change will affect EV sales?
We wanted a migration plan. I can’t argue with any of the components of the Inflation Reduction Act — sourcing rare minerals, assembling in North America, or even limiting his MSRP or household income — but there was a transition plan like OEM. must. [Hyundai] promised billions of dollars [to build EVs in the U.S.]This is certainly the honest indicator we intend to create here. In the meantime we’ve got a great product, it’s being accepted by EV shoppers and where we stand based on the very complex entitlements that exist for the federal tax credit. We will continue to generate sales until we understand
Does Genesis impose any new requirements or sales standards related to EV sales now or in the future?
Many OEMs are taking advantage of the high cost of EVs to update their dealer margin structures for these vehicles, including Genesis.
Pay MSRP for EV. However, Genesis protects a core ‘visible margin’ for non-EVs, and all EVs are eligible for all Keystone payments.
There are some qualifications to earn that base margin, but Genesis does its best to ensure that all dealers qualify. They are similarly categorized into lists. [Customer Satisfaction Index] Whether money or your signature retailer’s money.
How is the Keystone program going?
The Keystone program continues to evolve — it’s a living thing. Genesys has designed the Keystone program to reward high performance. The Advisory Board discusses with Genesys management specific, possibly ad hoc, challenges to achieving superior performance. [For example], most of the Genesis business is now housed within Hyundai’s business premises, which adds a certain amount of challenge, especially when the Hyundai facility is undergoing a very timely Hyundai-mandated renovation. Dealers are moving Genesis sales and service teams to trailers or temporary lots while work is done at Hyundai’s facilities. Genesis clients don’t want to ride in a Hyundai dealership in the first place, and they certainly don’t want to ride in a Hyundai trailer.
We work with Genesis to ensure the program is fair.
What is missing from your product line?
Dealers want Performance GT Coupe – Rumor has it. I think it could be an EV as there is a lot of performance that comes with an EV powertrain. A convertible concept, the X Convertible, was unveiled at the Los Angeles Auto Show. I think the production of that convertible helps put an exclamation point at the end of the statement that Genesis is a complete, authentic luxury brand.
We would also like to see a true 3-row GV90 sport utility. The GV80 has his third row option, but it’s very small.