Genesis Sued In The US For Pressuring Dealerships To Build Showrooms

• The lawsuit was filed in Florida against Hyundai Motor America and Genesis Motor America.

• Two performance incentives were created to coerce dealers into complying.

Hyundai is working hard to differentiate its Genesis luxury brand from its mainstream brands. One way they are doing is by asking dealerships to invest in building new showrooms for the product. Dealers that are complying with the request are getting incentives, according to the lawsuit.

Said lawsuit was filed in Florida last week by Braman Hyundai alleges that Hyundai Motor America and Genesis Motor America will give dealers an incentive equal to 2% of the manufacturer’s suggested retail price of each Hyundai vehicle sold, while Genesis sales will generate an 8% incentive. The issue is that dealers that do meet Hyundai and Genesis’ demands are exempted from the programs. This allows compliant dealers to undercut them, according to the story published on koreatimes.co.kr.

“Dealers, including Braman, that do not meet Hyundai Motor’s demand, suffer an increased effective wholesale cost, which places them at a distinct competitive disadvantage as compared to neighboring dealers that meet their demands,” Braman said in the complaint.

“Unlike noncomplying dealers, complying dealers benefit from substantially decreased effective wholesale cost, and gain the ability to offer prospective customers substantially lower retail pricing, allowing them to lure customers away from noncomplying dealers.”

Over the years, many dealerships have invested in separate showrooms with varying returns on the investment. Fiat is an example where the return was far below expectations. Braman states that the requests are unjust given foreseeable future economic times. They are asking for an end to the incentive practice.