The Genesis upstart luxury brand has been a critical success in the U.S., with awards showered on its three-sedan lineup over the past five years and early acclaim for its first crossover, which arrived in dealerships in December.
But it has struggled with sales and its dealer network. Currently, all 350 Genesis dealers continue to operate out of their Hyundai stores.
So there’s a lot of work ahead. The new year is looking to be something of a watershed, as a second crossover arrives in the U.S. and the brand works with dealers on programs to fund dedicated facilities.
“Distribution, fixed operations policy, getting the support that we need for some of the infrastructure items as the certified pre-owned business starts to emerge — there are so many things that we’re really seeing for the first time,” said Peter Lanzavecchia, chairman of the Genesis National Dealer Advisory Council and owner of Genesis of Cherry Hill in Marlton, N.J. He also owns Burns Hyundai at the same location.
Lanzavecchia, 65, thinks sales could triple this year for many dealers, thanks to the new crossover offerings and new investments by retailers in staff dedicated exclusively to the luxury brand.
Lanzavecchia spoke with Staff Reporter Laurence Iliff. Here are edited excerpts.
Q: What are some of your goals for this year as head of the dealer council?
A: I’d say it’s really a continuation of our priorities from last year, which is to work with our Genesis Motor America partners on the basic topics for a new brand. Distribution, fixed operations policy, getting the support that we need for some of the infrastructure items as the certified pre-owned business starts to emerge — there are so many things that we’re really seeing for the first time. Continuing to work with our GMA partners on the balancing of incentives and the product cadence. We have some new products that have just hit the lot. It’s a very different structure of support, say, on our G70 sedan that’s getting a major refresh in a couple of months versus the launch of the GV80, our first crossover, or the redesigned G80 sedan.
Things are moving very fast, and we’re setting goals to stay in touch on a regular basis with Genesis Motor America to make sure that we continue to provide the retail perspective.
Genesis was set for a big year in 2020, but those plans were ruined by the coronavirus pandemic, as new products were delayed and inventory was constrained. Why is 2021 going to be different?
When the pandemic hit, there were some very dark days. March and April, we were basically staring into the abyss. There were so many unknowns. We just went into survival mode. We did get a lot of support from Genesis. They had the Genesis Cares program, which had some dealer-facing cash flow and support programs, as well as a lot of consumer-facing programs to keep the retail velocity going as reasonably as could be expected.
The delay of GV80 production was a big disappointment to the brand and to the customers who were waiting for it.
As far as 2021, in the month of December, we already saw the GV80 in many retailer locations double their sales. And there’s no reason to believe that’s not going to continue or even improve in 2021. So if you think about it, the GV80 has the potential for doubling the retailers’ sales. And our CEO, Mark Del Rosso, has already gone on the record that we will double sales in 2021 versus 2020. I think there is upside to that number, and here’s why: We’ll have a partial year of GV70 on top of the GV80 sales momentum, and we’ll have a full year of the new G80 sedan rather than just a few weeks in 2020. I think there are many retailers that are goal setting to triple their Genesis sales in 2021.
Genesis has had some ups and downs establishing a dealer network since its birth five years ago and is still operating out of Hyundai stores. Has the brand figured out how to implement the Keystone facilities program to establish dedicated sales outlets?
I think it’s fully baked at this point. What may be still under development is some of the specific timing. The pandemic has thrown a bit of a wrench into some of the initial timetables, and both Hyundai and Genesis gave a six-month extension on most everything, and the dealers were very happy to receive that.
We’ve got a solid plan to continue to launch the brand short term in a cohabitation environment. And then Genesis has put together a very, very generous facilities support program. In fact, it is the most generous facility support program that I’ve ever seen in terms of financial support. Dealers have some choice there. They have the choice of a fully exclusive facility, which would be a complete standalone sales and service operation, separate from their Hyundai operation. But Genesis and Hyundai also collaborated on offering an adaptive exclusive facility for certain markets and certain locations that would allow the retailer to develop a complete standalone sales operation and a complete service facility to handle the electric vehicles that are coming from Genesis but still be allowed to service the internal combustion engines back at their Hyundai service operation.
You personally have one of the first standalone stores in development. Are dealers eager to join the race to have a dedicated Genesis store, or are they holding back?
There are actually three retailers that have moved along, getting their design books completed. We have the plans to our architect and our general contractor. We’re currently out for some estimates on some of the materials, but we’ve already acquired the land, and the location has been approved by Genesis. In my market, and in many markets across the country, the retailer just won’t be able to optimize both their Hyundai and Genesis opportunities out of one facility. Genesis certainly seems to be a brand that is going to warrant a standalone facility in all of the major markets.
Are Genesis production and inventory levels coming back in line with demand? If not, where are the shortages, and when do dealers expect meaningful progress?
From our perspective, production is back in line with demand. Getting it through the distribution system, through the port system and onto the trucks to the dealer lots is where there has been a little bit of a delay. Dealers who were handling reservations on both GV80 and G80 and who saw that their vehicles were in the ports, they were anxious to get them out. Obviously, the quality-checking process with Genesis is very rigorous. There’s also a trucker shortage in the industry that has delayed some of the dealers from getting their vehicles out of the ports and onto their lots. But overall with GV80 and G80 production now fully online, we still have a little more demand than supply, and dealers love that kind of equation. It seems to be in a really good balance right now.
How are Genesis dealer profitability levels at this point in the pandemic? How sustainable are current vehicle margin and profitability levels as inventory improves?
With Genesis allowing us to launch the brand out of existing Hyundai dealerships, it’s a very efficient model. Many of the larger retailers have engaged and committed with dedicated Genesis-only staff, and those are the retailers who seem to be getting some of the best results. In other words, the dealers that have put in dedicated Genesis sales teams, sales management, service concierge, valet drivers and even business development center representatives really seem to be the ones maximizing their Genesis sales.
Is Genesis doing enough to promote certified pre-owned sales?
With our certified business, we’re just now entering a period where there is some meaningful numbers of vehicles coming off lease. What we’re finding is that the Genesis certification just blows customers away. Just like we see with the Hyundai certified program being considered one of the best if not the best program in the industry, the Genesis certified program is also being considered best in class.
Is Genesis adequately advising dealers on how to prepare for mobility services, the advancement of autonomous vehicles and more electrification?
Genesis has been completely open and transparent about the electrification strategies for the brand. As far as autonomous, there’s so many different technologies out there, and we’ll certainly be looking forward to Genesis being a leader in autonomous and battery-electric. It sounds like electrification is the propulsion strategy that Genesis is taking. Retailers are just trying to get ready, get their infrastructure built, get their facilities built, and we’ll be ready for whatever comes along.
Is anything missing from the product lineup that’s not in the pipeline?
We’re completely satisfied with what we have now that’s under launch and what’s been committed to for 2021: the refreshed G70, the GV70, and it sounds by the end of the year there will be a battery-electric. So we’re drinking out of a fire hose right now. There’s been rumors about the Mint coupe concept or perhaps a high-performance sports coupe, more of a halo vehicle. We have a lot of confidence in the Genesis planners and design team and that what will be delivered in the years to come will be very, very supportive for achieving our business goals.
What is Genesis doing to direct dealers on the digital retailing front, particularly with omnichannel capabilities?
Genesis has been extremely supportive of helping Genesis retailers get a digital retail solution installed on their Tier 3 websites. But what we found during the darkest days of the pandemic is that all of us really have digital retailing already underway. So what we kind of did was scale that team up because literally our showroom doors were locked and the lights were out. We found that we could continue to do business, and customers loved it. We were providing information on inventory; we did proposals on retail payments, lease payments. We weren’t allowed to ride in a vehicle with a customer, but we were certainly providing a vehicle to a customer at their home or office for a test drive. And then we consummated the deal electronically. With the exception of a couple state motor vehicle forms, all of the banks and the captive finance companies were extremely cooperative on electronic signatures.
How are fixed operations doing for Genesis as a young brand?
Fixed operations are really starting to grow in a much more significant manner. During the first three years of ownership, it’s really complimentary maintenance. So the service departments are doing a pre-delivery inspection when the vehicle arrives off the carrier, we do a second inspection within 24 hours of delivery to the retail customer, and then we start on our complimentary maintenance. What retailers are focusing on now, for the nonlease customers that are keeping their vehicles beyond the complimentary maintenance period, is to design a maintenance schedule that continues to offer valet service and loaner vehicles that the customer enjoyed during their complimentary maintenance. That’s all up to the individual retailer, but we’re finding that the client is so much in love with valet service that they won’t give it up.
How has salesperson productivity at Genesis dealerships changed during the pandemic?
The retailers that engaged early and put in dedicated staff really had to do so before there was enough volume to justify a standalone sales team. And Hyundai was a hot brand last year. So last year some of our Genesis salespeople were kind of looking over the wall and saying, “Hey, what about all that Hyundai stuff going on? Maybe I could get back there a little bit.” After December and January sales gains, some of the Hyundai sales team is looking over to the Genesis folks, saying, “Are the any openings on the Genesis sales team because I think I might want to transfer over there.”
So Genesis salesperson productivity has doubled, and we’re now trying to scale up our sales team.