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| A standalone showroom of Hyundai Motor's luxury brand Genesis in Yongin, Gyeonggi Province / Courtesy of Hyundai Motor |
By Nam Hyun-woo
Hyundai Motor is facing a suit filed by a U.S. car dealer agency claiming the Korean carmaker compelled dealers to set up separate showrooms for its Genesis brand, by running discriminative incentive programs forcing noncompliant dealers to sell the vehicles at higher prices.
According to the U.S. District Court for the Southern District of Florida, Braman Hyundai filed a suit against Hyundai Motor America and Genesis Motor America on Aug. 7, calling for Hyundai's U.S. entities to end the practice and offer compensation. Braman Hyundai is a Miami-based Hyundai dealer firm.
In the complaint, obtained via Law 360 outlet, Braman claimed the two companies "coerced" it and other dealer companies to set up standalone facilities for Genesis vehicles, and showcase them separately from Hyundai or vehicles from any other carmaker.
Braman said to coerce dealers' compliance, Hyundai Motor and Genesis introduced two "unlawful" performance incentive programs ― the Accelerate Program by Hyundai Motor and the Keystone Program by Genesis ― in which the dealers' profits are affected if they refuse to comply with Hyundai units' "unilaterally set objectives."
"Through the Accelerate Program and Keystone Program, HMA and GMA impose unreasonable facility requirements unlawfully intended to decrease the dealer body and to coerce Hyundai and Genesis dealers to construct standalone Genesis facilities."
Through the programs, Braman said dealers who complied with the demands were eligible to receive an incentive equal to 2 percent of the manufacturer's suggested retail price of each Hyundai vehicle sold, and Genesis conditioned an 8 percent incentive. However, those noncompliant were exempted from the programs, allowing compliant dealers to undercut them.
"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."
Since Genesis' launch in the U.S. in 2017, Hyundai has been attempting to separate the retail process of Genesis vehicles, but a number of U.S. dealers have been resisting due to the high costs of setting up independent facilities.
According to Braman, it requires millions of dollars of new investments to set up new showrooms or renovate existing facilities, which he deemed to be "unreasonable" given "the current and reasonably foreseeable projections of economic conditions and financial expectations."
Over Braman's claim, Hyundai Motor confirmed that it faced a suit, but declined to comment.
