Genesis: A New Beginning for Hyundai, but Is the World Ready?

By Michelle Krebs February 4, 2008

By Dale Buss Hyundai_genesis_unveiling_283

Hyundai executives view their new Genesis sedan –- featured at the recent Detroit auto show -– as a velvet ramrod that will help them shatter the glass ceiling over their brand and move it decisively upscale.

The problem: The upscale ceiling over Hyundai may prove too resistant to the budget brand’s ambitious attempt to smash it and grab a piece of the luxury market.

Hyundai Motor America executives certainly haven’t lacked for expressed confidence in Genesis, their first rear-wheel-drive sedan and one that offers a new V8 engine. They made the car the star of their pricey commercials during Sunday's Super Bowl.

“Genesis provides a potent combination of performance, luxury and value,” said John Krafcik, vice president of product development and strategic planning, at the Detroit show, where the Genesis production made its North American debut after its global launch in Korea in December. “We think it has the opportunity to be an extremely disruptive force in the large sedan and near-luxury segments.”

Staking an Upscale Claim
The main case for Genesis is that it may well, as Hyundai argues, offer many of Hyundai_genesis_v8_engine_210 the benefits of luxury sedans for prices merely starting at $30,000. These start with the V8 engine, called The Tau, that generates about 370 horsepower, and also include features such as XM NavTraffic, Adaptive Front Lighting, Smart Cruise Control, electronic active head restraints and an audio system produced by a brand, Lexicon, whose only other automotive outlet is Rolls-Royce.

“While Genesis will compete for customers with cars like Chrysler 300 and Pontiac G8, our engineering benchmarks were Mercedes E-Class, BMW 5 Series, Infiniti M and Lexus GS,” Krafcik noted.

Hyundai Vice President of Marketing Joel Ewanick believes Genesis is emerging precisely at a propitious new juncture the brand has been creating just for this moment. “The best part about Genesis is it’s going to take all the truths about Hyundai that we have working for us and put them in one spot, which will also Hyundai_genesis_interior_240 elevate the entire brand,” he told AutoObserver at the Detroit auto show.

Ewanick maintained Hyundai’s recent “Think about it” advertising campaign has been helping elevate perceptions of the overall brand. “It erodes negative perceptions and attracts customers who want to be on the cutting edge and be part of the movement of a new brand –- so they can discover it before other people do,” he said.

“Our momentum is one of the strongest in the industry. And right now we’re putting out some of the best cars on the road.”

Hyundai’s steadily rising scores in independent indices of product quality will help. Even the prospect of recession and of a more sober-minded U.S. automotive consumer may play into the hands of Genesis, Ewanick said. “They’ll be adjusting their buying habits and looking for value for the money, not necessarily for the cheapest car,” he said.

Reasons for Skepticism
But there are at least a few substantial reasons some observers doubt Hyundai can pull this off, at least with Genesis –- or anytime soon.

For one thing, the decision to offer and promote a V8 engine –- the Genesis also offers 3.3- and 3.8-liter V6 engines –- may add little to the car’s appeal, given U.S. gasoline prices that seem locked in at around $3 a gallon. And the V8 requires the even more expensive premium gasoline for maximum performance. Hyundai said the engine will produce an estimated 375 horsepower using premium fuel and 368 horsepower using regular unleaded leading all competitors in specific output with 79.5 to 81.0 horsepower per liter.

One illustration of lesser interest in V8s lately, for example, is only 15 percent of visitors who are configuring potential new vehicles on Edmunds.com are including V8s these days, down from 19 percent two years ago.

Another obstacle is Hyundai already has proven it has difficulty selling larger and expensive models, including its Azera luxury sedan, Veracruz SUV and its Entourage minivan. In November, according to an analysis by Edmunds.com, the Suzuki SX4 and Forenza, among many others, outsold the Azera, despite its offering nearly $2,800 in incentives, according to Edmunds.com’s proprietary Total Cost of Incentives formula.

“That makes it odd that they would want to take it a step further right now and go further upmarket of Azera,” said Jessica Caldwell, an analyst for Edmunds.com.

Hyundai: Trying to Break into the Luxury Class

So far consumer reaction to Genesis itself seems to be largely positive. “People like the styling and the vehicle,” said Art Spinella, president of CNW Marketing, a Bandon, Oregon, automotive-research firm that surveyed 900 consumers in three cities recently using Genesis press materials Hyundai produced for the Detroit show. “But they’re not willing to spend that kind of money for a Hyundai.”

The brand-association challenge may rank as Hyundai’s largest, given its aim for Genesis. CNW’s focus groups liked Genesis a lot but expressed lots of resistance to considering a Hyundai as a luxury choice, Spinella said. At best, he said, Hyundai will have to be committed to growing Genesis sales steadily for four or five years before it could be assured of long-term success in positioning it as a luxury vehicle.

“Many luxury brands did well in 2007," added Caldwell. “But the ones that didn’t do as well, such as Acura and Volvo, don’t have as much brand prestige as others do, such as Lexus and Mercedes-Benz. That tells you that luxury buyers keep flocking to the same high-prestige brands. I just don’t think Hyundai is one, because luxury buyers are image buyers.”

Caldwell noted Subaru attempted to go upmarket a few years ago with the B9 Tribeca SUV and a redesigned Legacy/Outback “and lost their identity. It was a poor attempt and they have retreated from that direction and gone back to messaging mainly about all-wheel drive.”

And after trying to climb the upscale mountain with Genesis, Caldwell suggested, Hyundai may end up having to do the same thing.

Photos by Hyundai

1 - Hyundai's John Krafcik unveils the Genesis sedan at the Detroit auto show.

2 - The Genesis marks Hyundai's first use of a V8 engine.

3 - Hyundai positions the Genesis as offering the best in luxury at a lower price -- $30,000 or less.

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Casey says: 6:15 AM, 02.04.08

"...its Azera sport-utility vehicle and its Entourage minivan. In November, according to an analysis by Edmunds.com, the Suzuki SX4 and Forenza, among many others, outsold the Azera, despite its offering nearly $2,800 in incentives..."

The Azera is not a SUV, I think you meant Veracruz. And why compare Azera sales vs. sub-compacts from Suzuki. Wouldn't a sales comparison vs. the ES300, Maxima, and Avalon be more telling as its main competitors?

アイドル画像 says: 6:42 AM, 02.04.08

very exciting site!!

Double Wishbone says: 10:35 AM, 02.04.08

An interesting move by Hyundai. A bit delusional though. Reminds me of VW's Phaeton - a nice car from a non-prestige brand that totally tanked.

More frustrating to me though is how can Hyundai have the will and ability to make this car and Honda can't get that done for it's Acura division? As brilliant as Honda has been with it's Honda division - Fit, Civic, Accord, CR-V, Odyssey are all segment leaders -, it's Acura strategy is borderline negligent. Only the MDX (and perhaps the new TSX) are segment leaders. They better get it together quick.

Well? says: 1:39 PM, 02.04.08

Autoblog states that the V8 does NOT need premium fuel. Which is it?

Michelle Krebs says: 6:27 PM, 02.04.08

Here's what Hyundai's press release says about the Genesis V8 and premium fuel: "The Tau will produce an estimated 375 horsepower using premium fuel and 368 horsepower using regular unleaded leading all competitors in specific output with 79.5 to 81.0 horsepower per liter."

Ralph A Boneillo says: 6:59 PM, 02.04.08

i think that this will redefine the auto market. So much horsepower for so cheap, i feel it will even cause other companies to lower their prices.

G Mercer says: 9:08 PM, 02.04.08

One thing I notice virtually NO one mentions is the dealer network. I think it is hard to sell a champagne car at Mo's Bar. Even if the car is wonderful (and I am sure it is), how many BMW intenders will leave the soft-lighting, espresso machines, and paneled elegance of a Bimmer dealership for the fluorescents, soda vending machines, and linoleum of a down-market Hyundai store? I am not being critical of Hyundai dealers: their facilities match the cars they sell now, and frankly if I were buying a $15,000 car I'd say to myself "Why am I paying for all this marble and wood in a fancy dealership?" But a would-be Genesis intender needs a lot of encouragement to step over the Hyundai dealer doorstep. Lexus et al. all do it with separate stores... why not Hyundai?

D Gunter says: 7:14 PM, 02.05.08

Make no mistake: Hyundai realizes and admits this car will play more against Lucerne, G8, and 300 than any Lexus, BMW or Mercedes. The comparisons to those marques are puffery. The intent though is to raise the prestige of the Hyundai brand, not move it that far upmarket. A second brand is in the works and there are already spy shots of a larger car that won't be badged as a Hyundai, at least not in the US. Genesis is definitely a test run for the US.

Anish says: 6:22 AM, 02.06.08

I think Acura and Volvo have a problem making the luxury statement because they offer nothing luxurious(The Accord has all the features of TL and a lower MSRP)..all their cars are either FWD or AWD...they have no performance RWD models. Acura doesn't even have a V8, no convertibles, no 6 speed AT, the RSX was just an expensive Civic and the NSX with V10 is taking too long to build (which again will have a SH-AWD instead of RWD (as claimed)). Lexus made its mark because it started with a right engine and a right chassis (Infiniti too).
I am Hyundai owner and very proud to drive it. I have high hopes for the Genesis and the Genesis Coupe.

J W Barto says: 7:58 PM, 02.07.08

I agree with the person who commented on the Hyundai dealerships and their "Mo's Diner" perception. We have a nice dealership around here.. it has nice floors, leather sofas and a flat screen TV. There is even coffee for free. The problem is the road that it's on is flanked by run-down stores and the condition of the road is poor. Also, there are unsightly utility lines crisscrossing above the street. Here is where the person making this comment misses the point about the Hyundai Genesis however. Taking customers from the BMW and Lexus audiences is not the goal of Hyundai... but rather to offer a luxury car to the millions of consumers making some money... but not the same kind of money as the someone who can afford all the swank and marble floors. Hyundai is changing what it means to be a luxury car owner... it's about image to "the other guys", it's smarts for "the rest of us." And yes, the parallel to Apple, Inc.'s Macintosh marketing slogan was intentional. If you look at the Mac and it's rise in market-share lately it stems from positioning the Mac as the smart choice. And in case you forgot, here is Hyundai's tagline... Think about it.

Jack L Lentz says: 5:21 PM, 02.15.08

Gentlemen:
And ladies of course. I am a convinced Hyundai owner who once thought (and sold for thirty years) Oldsmobile was as fine a car as could be driven. After retiring I went to see the new Hyundai XG 350 sedan and was very impressed with the wonderful luxuriousness of the ride. and the price at 18,000 or less. The car seemed to be slightly underpowered with a 2.8 V6. The appearance had a luxury yet a little bit under appealing look. However the more I looked the better I liked. When I finally decided to buy, the car was no longer being produced. So I tried the Sonata. It drove almost as luxurious as the XG. Since this was to be my wife's car I got her the 4cyl auto. The car has performed better than I could have hoped or or even imagined.
I have never bought, sold, or have driven an Oldmobile of any size or quality than has been as pleasing as the Sonata. and for about half the price. Not to mention the standard waranties that come with it. Two to three times longer. This having been said is why I went to see and drive the new Azera. I felt my Sonata was as good and just as eye appealing as the new Azera. No reason to upgrade in price. Maybe the reason the car has not sold as well as expected. I am looking forward to this new Genesis and if it is as good as the pre-showing reviews, I will trade my present other car. (not the Sonata) Most Hyundai owners do not know what a fine car they own. But I do.

Jack L Lentz says: 5:42 PM, 02.15.08

The other day a gentleman looked at my car and when I told him it was one I got for my wife he told me she was one lucky woman to have a spouse who would give her such an expensize automobile. He didn't know it was a Hyundai.

Min says: 3:06 PM, 02.25.08

I think Hyundai should come up with a different brand name to market their Genesis and Veracruz, perhaps just like what Toyota and Nissan did... but nevertheless, Hyundai did a good job trying to target a specific market. First, Hyundai is not trying to target customers in the $40,000+ market. Second, pricing on the Genesis is in the low-end luxury market like the Lexus ES, G35, 3-Series, C-Class catergory, and finally the car itself offers as much if not more than the GS/5 Series/E Class.

Min says: 3:08 PM, 02.25.08

I think Hyundai should come up with a different brand name to market their Genesis and Veracruz, perhaps just like what Toyota and Nissan did... but nevertheless, Hyundai did a good job trying to target a specific market. First, Hyundai is not trying to target customers in the $40,000+ market. Second, pricing on the Genesis is in the low-end luxury market like the Lexus ES, G35, 3-Series, C-Class catergory, and finally the car itself offers as much if not more than the GS/5 Series/E Class.

william graham says: 4:40 PM, 05.03.08

As a lexus owner. the 4th one. I may buy a genesis for the same reason I bought my first LS400.VALUE and to keep the others honest.I reember my friends thinking I was nuts to pay that much for a toyota. I think it would be wise for the dealers to find a separate waiting area for genesis customers ,comfortable chairs newspapers etc. If does'nt take much. my Lexus dealer is also toyoto under one roof,but we do have a separate and some what up-scale waiting area. Hyundai should encourage or even expect it from their dealers.

watchtower1 says: 2:00 PM, 11.20.09

I think the Genesis is a huge step in the right direction for Hyundai. I used to sell Hondas for a living and thought I would never buy another make... until I drove my daughter's new Genesis. It truly challenged my beliefs about Hyundai. They may soon have a convert... In the meantime I will be looking for a reliable St. Louis Hyundai Dealer.

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