Not just a rumor, but something that industry insiders at the time pointed out which was never refuted by Toyota (they never confirmed it either).
Again, like had said, it was a very landscape for the auto industry (much less land and construction costs).
There was a lot of anti-Japanese sentiment at that time (Chinese-American Vincent Chin was murdered by 2 auto workers thinking he was Japanese; neither ended up in prison) where the Japanese automakers "voluntarily" limited imports (and started to manufacture their vehicles here).
The Japanese Big 3 needed to keep their Japanese plants going (and increase margins) and they did that by launching lux/premium brands.
Like had stated, at the time - it was basically the Japanese and US markets that the Japanese paid attention to.
These days, Hyundai has to pay attention to India, Australia, the Middle East, Mexico, South America, Africa, China (albeit that has been a struggle ever since the Beijing-led embargo) and now Indonesia/SE Asia, nevermind also having to develop an entire line of BEVs and build new factories to manufacture said BEVs.
Also, Toyota dealerships were pretty profitable at the time and the top volume Toyota dealerships (presumably the ones that got the 1st Lexus dealerships) even more so.
Hyundai dealerships, otoh, were not that profitable until recently, as they sold a sedan heavy lineup in an SUV/pickup market.
Only with the addition of the
Palisade, new Tucson, Santa Cruz, etc. have Hyundai dealerships finally started to make good $$.
Even so, Toyota had to rush a lightly reworked JDM Camry to the US market as the 1st Lexus ES in order to give the Lexus dealerships the volume they needed in order to sustain themselves.
As already pointed out, Genesis' issue when it comes to sales volume is a tougher one to address as it requires adding production capacity - in which real relief won't come til the latter part of 2025.
So, you really expect Genesis franchisees as a whole to build million dollar spanking new dealerships and to bleed $$ until 2025 or more likely 2026? Lol
Now, may not be so much of an issue for the deep pocketed ownership groups (as previously pointed out), but many Hyundai dealerships owning a Genesis franchise are not like that and can't afford to bleed $$ for 4-5 years.
Nonetheless, despite the less than ideal situation re a separate dealer network, Genesis, as a brand already, has a significantly higher ATP than Lexus and is generally seen by the auto pubs as the only Asian lux brand that can go head to head with the Germans (this is where the actual product supersedes things like having fancy digs).
Going back to land/construction costs - sure it has generally risen over the years, but that doesn't change the fact that it is prohibitively more expensive now than during the 1980s-1990s.
During the 1980s-1990s, a person with a middle class income could still afford a home in the Bay Area.
Now, it's virtually impossible.
Thought RE prices were already thru the roof when a nice, starter home in the Bay area was going for $2.5 million a decade ago.
It's basically
doubled in price since then.
Also, due to the effects of the pandemic, construction costs went thru the roof.
The price of lumber went through the roof.
But due to higher interest rates, etc. - costs have been coming down.
Besides, the example you gave was of an already existing Lexus franchise for an already decades long brand.
They already knew the type of sales volume they were dealing with; plus land isn't that expensive in Arlington which is why they keep building new ballparks.
If a Genesis franchise built a likewise size dealership (btw, with sales increasingly moving to online, spending that much on an auto dealership looks like a poor investment for the long haul), they would go under in a couple of months since they wouldn't have product allocation/volume to support such a dealership (that is, if they were able to get the financing in the 1st place as no bank would lend them the $$ knowing the supply/allocation situation).
www.lexusofarlington.com
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