Presented by:
Hey everyone,
Tune in Monday for our special Memorial Day broadcast of Daily Dealer Live, featuring:
Manny Sedano, dealer principal and veteran
Andrew Sweet, CEO of SelectFi
Chris Taylor, dealership owner and veteran
Katie Lamphere, veteran and founder of Veterans in Automotive Retail
— CDG
For months, we've heard the rumblings of frustrated Hyundai dealers navigating unrealistic sales metrics, mandatory facility upgrades, and inventory stacked on inventory.
Our sources at Hyundai Motor America, meanwhile, say otherwise.
"Strong dealer relations are a core pillar of Hyundai's overall strategy," the company said in part via email, adding that CEO Randy Parker participates directly in regular in-person Dealer Council meetings.
Regardless, dealers feel a gap between what they're operating with and what they need from their OEM partner, which makes it a conversation worth exploring.
That brings us to this week’s edition…
Three pressures weighing on Hyundai dealers right now + the tactics protecting profits and morale.
Incentive programs are punishing top performers.
Hyundai dealers tell me they’re navigating incentive programs that seem to penalize achievers.
What we mean: Scott Falcone of World Auto Group owns three rooftops, including a Hyundai store in Illinois that ranks second in Hyundai's central region.
Falcone says he has a good relationship with Hyundai, but understands why top-performing dealers feel frustrated.
His concern isn't the stretch goals themselves so much as the OEM raising the bar without helping dealers clear it.
"When they see you climbing and your sales go from 130 to 140 to 150, and your goals are moving farther and farther away…," Falcone said. “It pisses off the good dealers who are excelling, because they keep moving the goal posts.”
Scott Falcone
World Auto Group
To counter this: His dealership started auditing its own numbers about six months ago to stay ahead of program metrics early, instead of scrambling at the last minute.
On pricing and incentives, this also means:
Knowing the MAAP and using it as your floor.
Not giving up on tough goals, but finding a way to get them done.
And checking the math at cycle’s end if the team is a few units short.
As he explained: "If we get down to those last few days, and we can justify from a business standpoint and a mathematical standpoint that we need to take four really bad deals, and let's say they cost us $1,000 a car, $2,000 a car, in exchange for $125,000 — that's a math problem, and it's a no-brainer."
Worth noting: Hyundai told us it’s actively listening to dealer feedback on incentive programs through direct outreach and its dealer council.
"Our current PEP and incentive structures are performing well overall, and we continue to review them in collaboration with dealers to ensure they remain effective and responsive as conditions evolve," the company wrote via email.
That said, Seth L. Dobbs, esq., co-chair of Fox Rothschild LLP's National Automotive Practice, told me that many Hyundai and Genesis dealers are increasingly frustrated because it’s hard to make money from sales and fixed ops.
“All the while continuing to shoulder the substantial financial burden of facility upgrades, and image program requirements imposed by Hyundai and Genesis,” Dobbs said.
Seth L. Dobbs
Fox Rothschild LLP
His advice: Flip over every stone. Review everything from expense controls and inventory management to fixed ops efficiency and OEM incentive compliance.
A quick word from our partner
In a market where shoppers are stretching every dollar, your listings need to answer every question before it’s asked.
93% of car buyers use auto marketplaces in their path to purchase — and a complete listing often separates a click from a pass.
How you merchandise your vehicles influences every stage, from AI search to your first sales conversation.
Our merchandising guide gives you the tactics to turn more VDP views into qualified leads.
Building and brand image requirements are hitting dealers right in the wallet.
Dealers have also told us that Hyundai’s brand image requirements are costly.
For example: Bob Loquercio, CEO of his namesake Bob Loquercio Auto Group, owns 16 dealerships in multiple states. Loquercio has built three Hyundai dealerships at staggering costs, including a project that exceeded $20 million (with land).
"They were very strict on what we can and can't do, and we can only buy our supplies from certain vendors, and you know, it caused tremendous cost overruns, and we'll probably never recoup," Loquercio said.
Bob Loquercio
Bob Loquercio
Auto Group
Still: Hyundai said that the vast majority of dealers are already compliant or in progress with its Global Dealership Space Identity (GDSI) program that has been in place for many years, and it "remains focused on a sustainable approach that balances brand standards with dealer investment considerations."
For those building, here’s what attorney Dobbs suggests:
Carefully review every document.
Evaluate the return on investment for projects.
Explore and understand all rights and obligations under dealer agreements and applicable state franchise laws before committing.
His argument: Building requirements may not always be negotiable, but construction costs have flexibility.
On that note…
Michael Szemansco, founding partner of Synthesis Architects, LLP, a full-service architect firm with services that include working with dealers on OEM facility mandates, explained why hiring an independent architect is a good idea. (Yes, yes. He knows he’s biased.)
"We're sort of the angel on the dealer's shoulder, trying to help them navigate the OEM design process and different project phases,” Szemansco said. “Our goal is to help right-size the building, tailor the floor plan to their operation style and help them save money as part of the design and construction process.”
Michael Szemansco
Synthesis Architects, LLP
His reasoning is this: Having an independent architect allows dealers to control the design narrative instead of reacting to the OEM's plans.
Plus, they’re involved in every step and work with city planners to ensure compliance throughout the project’s end.
During construction: The architect examines the workmanship, flagging issues for the builders, while making sure that OEM-mandated design elements are properly built or installed.
Szemansco said it’s typically about 3% to 5% of construction costs. So on a $10 million project, that's $300,000 to $500,000, and typically includes all engineering on the project, too.
His suggested checklist:
Ask for exceptions, which can cover anything from material swaps to reworking a department layout to choosing material substitutions to alternative furnishing systems.
Negotiate back-of-house finishes. Often, manufacturers will agree to changes where customers don’t see.
Check common issues, such as mechanical system glitches, waterproofing issues, roofing installation quality, and lighting programming errors that can be costly if not done properly. (Even if it takes time for it to break.)
Sometimes, a new building is less expensive than renovating, so it should be carefully evaluated early in the process.
Bottom line: Even if building and brand imaging requirements feel steep, negotiate every detail that you’re able.
Advertising rules are squeezing dealers’ ability to move all that inventory.
With FTC and advertising practices under the magnifying glass lately, Hyundai dealers find the restrictions can put another squeeze on selling, all while they’re battling rising inventory.
On one side: Falcone’s day supply is 50s-60s, and he said they manage that well.
His quick fix about accepting extra inventory: Just say no.
"Your relationship with the factory doesn't turn adversarial because you say no, because that's not a partnership,” Falcone said. “That would be a one-way street."
Meanwhile, advertising options feel limited to Loquercio.
"All we do is we talk about our availability, the number of cars, and the customer experience," Loquercio said.
His stores have about 80 days' supply, just a tad higher than they prefer.
“We'd like to be at 60 or under, so 80 doesn't scare us,” he said.
How they deal:
The group leverages its size and banking relationships to carry inventory at a lower floor plan cost than most, but stays disciplined about moving aged units first.
Sometimes they move vehicles at reduced gross to speed up the process.
As for Hyundai: It said it “…does not believe that FTC-aligned transparency requirements are negatively impacting sales, and we continue to support dealers with tools, training, and retail processes that help them operate effectively in today's environment.”
Bottom line: One theme runs through all three pressure points. Dealers navigating this best aren’t accepting the situation as fixed.
Ask for exceptions on facility costs.
Audit incentive numbers early and regularly.
Manage floor plan expenses tightly.
Hyundai may have work to do (same can be said for other OEMs), but there’s no need to wait to improve the situation.
