And the bigwigs spent ten years building brand equity with cheap, basic transportation. And lo, the Japanese automakers headed upmarket, ceding entry level business to the Koreans. And the Seoul sales train smiled for it was good. And then came the Genesis, and Hyundai’s new day morphed in the minds of its creators from budget luxo-fighter to an opportunity for sub-brand confusion and ADD.
Speaking to Wards Auto at the New York Auto Show, Hyundai NA president John Krafcik reveals that rather than allowing the Genesis to lend Hyundai’s brand an “any segment, any sale” halo, the firm wants to spin it off into a Lexus-alike subbrand. And the plan (like all vapid branding exercises) isn’t product-led (although it could theoretically lead to a rumored stateside launch of the Equus luxobarge); there are no firm plans to expand the Genesis offerings beyond the current coupe and sedan. Nor will Hyundai build a new dealer network to offer a uniquely elitist ownership experience. Instead, a Scionesque dealer-within-a-dealer model is envisioned. “That’s a good way to go,” Krafcik opines. “That way, dealers don’t have to spend $5 million, $10 million on a new luxury brand. Sectioning off the brand, that’s the Holy Grail.” Funny, because it seems that allowing the Genesis to continue changing consumer perceptions of the once-jokeworthy brand would be “the Holy Grail.” After all, wasn’t that the reason for embarking on the Genesis project in the first place? “Big company syndrome” strikes again?
In Hyundai’s mind at least isn’t Hyundai supposed to be the upscale brand and Kia the “value/ sporty” brand? Genesis may be the first big step in the reality meeting their perception. Let you know in 17 years or so.
And then came the Genesis, and Hyundai’s new day morphed in the minds of its creators from budget luxo-fighter to an opportunity for subbrand confusion and ADD.
There’s nothing really wrong with this strategy, and there are several non-automobile brands in North America that have a premium sub-brand. And outside of North America, it certainly does play well even within automotive brands.
Krafcik’s point is a good one: this car shows what Hyundai can do, and positioning (and pricing) it as a very nice Hyundai makes sense instead of creating an artificial brand and trying to fight established brands during a credit crunch. And it stands a chance at working because Hyundai is going the value route, rather than stacking the hubris six feet deep as VW did with the Phaeton.
It’s what Chrysler could have done with the 300C, if they’d kept up with it.
Where the ADD comes in isn’t the span of the brand from Accent to Equus, it’s the overlap with Kia. Hyundai needs to decide if Kia or itself is going to be the “Sporty” brand and start killing models regardless of how much dealers scream.
Kia:
Loses the Rio sedan
Loses the Sportage (but keeps the BoF Sorrento)
Loses the Sedona
Loses the Borrego, or at least decontents it out of the the luxo arena
Loses the Amanti (please, god)
Loses (or significantly changes) the Optima/Magentis into something akin to the old Mazda6
Gains the Genesis Coupe
Gains the Elantra/Forte wagon
Gains the Bongo small pickup
Gains the Forte coupe
Hyundai:
Loses the Accent hatch
Loses the Elantra wagon
Loses the Tiburon
Loses the Genesis Coupe
Gains the Borrego (if Kia drops or significantly changes it)
Some say that a $40,000 Hyundai will never catch on. Others argue that a separate luxury distribution channel is too expensive and too risky at this point in Hyundai’s evolution.
Seems to me that selling a “Genesis” sub-brand out of existing showrooms is a logical place to start. It lends a halo effect to (and shares the distribution efficiencies of) the rest of the Hyundai lineup, while being distinguished enough to please the up-and-coming Donalds out there.
The absence of “H” badges on the Genesis was an interesting start, as if to invite a discussion about where this car belongs. But that won’t fly forever; sooner or later they’ll have to come up with an answer.
In Hyundai’s journey from automotive penalty box to sound family transportation and even desirable conveyance, this is not a bad strategy. A full luxury sub-brand isn’t an easy or cheap step to take and has historically yielded mixed results all the way from failure (Eunos), lukewarm (Acura), slightly less lukewarm (Infinity) and successful (Lexus). The dealer investment required to do this during a recession is also considerable and risky at a time when sales are down – just ask any Hummer dealer how they feel about the money they spent on their showrooms.
However, Hyundai does well to elevate their Genesis efforts and separate them from their economy products as they really cater to a very different demographic.
Considering the current economic climate the compromise choice they have made may actually be quite sensible.
Eunos. Wow, I had forgotten about that one. Mazda was smart to pull the plug when they did.
If they do this, how are they going to rationalize the fact that the luxury brand has a car named “Genesis” (the sedan), while regular ‘ol Hyundai ALSO has a car named “Genesis” (the coupe).
One would think that a separate MAKE branding effort would also warrant a separate MODEL branding scheme… unless of course they take the Genesis coupe upscale too…
For my money, this is absurd. TTAC bashes other brands for trying to be all things to all people. Then, when Hyundai makes plans to keep the Hyundai badge coherent as a value brand by not selling all its luxury cars under it, TTAC bashes Hyundai for “big-company syndrome.”
P&G doesn’t sell bathroom cleaner as Tide. Hyundai shouldn’t sell a full line of luxury cars as Hyundai. Having high line and low line share a showroom is the same strategy that served Chrysler and Plymouth well for 50 years. As long as you distinguish the products from each other, it works, exactly as carguy said.
What’s the problem?
Seeing how even the latest and greatest Hyundai’s cannot stand up to the road salt used in many areas of the country, I’d say they still have a long way to go.
I’d only buy one if they were substantially less expensive than a Toyota or a Honda. I’d take a Focus or a Cobalt first as well.
Hyundai is properly positioned right now. Their sales have been solid, repeat business is good, and they are not asking the government to pay their bills.
Whatever problems or marketing mistakes they made it’s nothing like GM, Chrysler or even Ford. Toyota went in to the full size truck market and that was stupid. So did Honda and Nissan, even dumber. But while entering the luxury market full bore with Genesis may seem a stretch, the car is a great one and that makes the difference.
Hyundai does many things right. The market is coming around to their value and, now, quality (sounds funny to say it). The idea of selling luxury cars in a regular showroom ignores the value of brands. TTAC and other rightly criticize GM for not understanding brands on the product front (Cimarron anyone?). Let’s apply some fairness.
There’s no denying at this point that Hyundai can engineer a worthy luxury car. Can the dealer and associated personnel really provide a luxury brand experience while selling $10k Accents across the potted plants? No way. If Hyundai are serious about selling luxury cars, eventually they will have to pony up and do it right. I’d suggest a limited number of company owned stores and not use franchised dealers at all.
I guess I don’t see what’s wrong with the sub-brand thing, selling Genesis models alongside the more “average” Hyundai models. GM does a similar thing with the Corvette. The multiple versions of the Vette, all the way up to the $100k+ ZR1, sit in the same showrooms as Cobalts, Malibus, and Colorados. Why does Hyundai have to create an entirely seperate new brand to be successful with the Genesis?
Some of us don’t care about brand and just want engineering and a good car. Lexus used to be that brand – even if their cars were total snoozefests.
And if there is a brand that is compromising itself on a daily basis, it is either BMW or Porsche. Both of which aim for the soccer mom crowd.
The reality is the days of multiple near-overlapping brands owned by one company are limited. There is no real reason to assign any sort of luxury status to a car brand that sells cars at a relatively inexpensive $30K. Nobody had huge confusion buying a Ford truck and a Taurus in the 80s from the same brand and people can handle a 1-series to 7-series spread in cars along with a ton of ugly half-SUVs and the random mal-proportioned roadster.
The Phaeton took a lot of crap too, but really it just wasn’t quite the car it should have been, the Genesis is the car VW should have released.
There’s no denying at this point that Hyundai can engineer a worthy luxury car. Can the dealer and associated personnel really provide a luxury brand experience while selling $10k Accents across the potted plants?
Does it matter? Especially since the “luxury dealer experience” largely consists of being reamed by the service department.
I can’t say I’ve ever felt anything “special” about the Mercedes, BMW, Acura, Audi or Lexus dealerships I’ve been in (especially when the Lexus and Audi ones are glued to the side of a Toyota or VW shop). Infiniti’s spaces are reasonably nice, but again, it’s the same shit from the same salespeople.
I suppose a Rolls, Maserati or Ferrari might offer more, but that’s not exactly Hyundai’s market. For that matter, the seediest, cheesiest, potted-plant’iest dealership I’ve ever been in sold Lambos.
About the only luxury dealership brand worth paying for Lincoln, and that’s because a) the markup is very low, b) the cars are reliable and simple enough that you won’t get killed and c) it’s worth it versus Ford service. By that sad metric, Hyundai ought to do well. We’re talking about cars that will sell for the price of a loaded Avalon by people who have a clue about value for the money and/or are relatively strapped. The average Genesis buyer is not going to even consider a Lexus, BMW, Merc or Audi, and is certainly not going to put up with the kind of service-department bullshit their dealers try.
Hyundai is, by all accounts, not going to make the mistakes VW made with the Phaeton. What they’re selling is a nice car for an acceptable price, not a luxury car badged under a non-luxury brand for a luxury car price. It’s the difference between “Wow, I can get this for the price of an Avalon?” versus “Why should I get this instead of an A8, again?”
Seeing how even the latest and greatest Hyundai’s cannot stand up to the road salt used in many areas of the country, I’d say they still have a long way to go.
Where does that come from? I see any number of Elantras, Santa Fes, Sonatas and Accents in southern Ontario and they hold up no better or worse than most.
The determining factor in salt-based corrosion is behind the wheel. (wash your undercarriage, don’t park in a heated garage and, for god’s sake, get a good undercoating)
While I think that Hyundai’s products have established a reputation for quality and value, I believe it’s the dealer experience that must be different for a Genesis vs. an Accent if the brand’s upward move is to succeed. When I bought an Infiniti some years ago I enjoyed an amazing dealer experience for 5 years and even my Benz dealer today doesn’t equal that. In Canada a V8 Genesis sells for about the same price as a well-optioned Lexus ES350 but the Lexus service department will be used to dealing with its customers in one way while the Hyundai guys will need to learn to cater to the expectations of their new Genesis buyers who will expect a certain level of customer service different from what’s provided to owners of entry level models. I’m considering a Genesis, an ES350, an Avalon or a Maxima as my next car in about 7 months and when I visited a Lexus dealer the other day I learned that they don’t expect me to bring the car in for service: they will come to my house with a courtesy car, pick up my Lexus and leave the courtesy car for me, and repeat the process in reverse when the service is done. Oh, and by the way, they have customers over 50 miles out of the city for whom they provide that same “at the door” experience. I’d be lucky to get a courtesy car out of the Genesis dealer, I’m sure, and the Toyota dealer might be even worse. They’d point me to a bus stop or maybe offer me a shuttle ride to the nearest shopping centre and that would be it. It’s not enough to have the Genesis in a separate corner of the showroom; they need an upscale service experience if they really want to succeed in bringing Genesis up into the luxury category.
The problem with Hyundai is PR and its still mediocre quality. When Hyundai first started in ’86, they had the cheapest car (the only one it sold) in America for under $5K. Most of us still have memories of Rodney King’s white Accent that blew up on him when it hit 88 mph, as if he didn’t have enough problems.
Hyundai will have to go a LONG way before I will consider paying $40K for a luxury car, regardless of how good it seems. Five years from now they’ll look like the rest of Hyundai’s fleet after so many years; rusty, dented, and sputtering blue smoke.
brapoza – yes I admit to feeling particularly lukewarm about Infiniti. It’s a US-only brand that exists mainly in the fanciful day dreams of Nissan USA’s marking department. However, with both the GT-R and 370Z badged as Nissans, it appears that Infiniti’s parent company doesn’t really share their optimistic brand vision.
I think this is one of those things that depends more on execution than branding strategy maxims. If it works, it proves nothing about branding, and if it fails it doesn’t either. That won’t stop the branding gurus from making it into a case study.
Branding is, IMO, a marginal thing. Margins can make big differences, but they don’t make bad cars into good, or vice versa. The reality is you can win a game of baseball without hitting anything other than singles. You can also lose one because you did make errors, or even if you didn’t.
What I am certain about is that branding won’t save you from years and years of bad moves in the other areas of business.
It’s Krafcik, and ex-Ford chief engineer. Big ego company syndrome, indeed.
Any new car is only as good as the customer service provided. Don’t we expect a little more pampering and at the minimum providing a loaner when purchasing what we consider a luxury car?
Two words: Cadillac Cimmaron.
Well, before leasing my Genesis I was looking at the VW CC, Audi A5 and new A4 to replace my VW Passat. Since my VW dealer was also a Hyundai dealer, I had NO expectations re “dealer” or “service” experience: it would be hit or miss in service, fair in dealing (4 cars from this dealer and I’ve never paid more than $500 over invoice. The Genesis 4.6 w/Tech came in at invoice.)
The bottom line is that the Gen IS a luxury car without pretention in badge or price. Perfect for me, especially in times like these.