By on August 8, 2008

Nice, but a Lexus?  I don't think so.Interesting review of the new Hyundai Genesis luxury sedan in today's Wall Street Journal , which makes the inescapable point that the car is a Lexus GS460 for nearly $16,000 less ($53,785 versus $38,000). It has the second (to the way more expensive Mercedes E550) most powerful V8 engine in the class, runs on regular, sources its gearbox from ZF, has a warranty 10,000 miles better than Lexus's or BMW's, more front and rear legroom than either one, and an interior of equal quality and tastefulness. For better or worse, the Genesis even has a mock-BMW iDrive. (The reviewer, Jeff Sabatini, says it's better than BMW's, though, precisely because it does less.) The assessment comes to an unfortunate but inarguable conclusion: aside from whether or not a strong market still exists for cars of this size and cost, Hyundai has missed the point of why Lexus buyers pay an extra $15,785 "just for that badge on the hood… the fact remains that these cars are immensely popular precisely because they are symbols of money, power and success. The people who buy them aren't likely to spend their year-end bonuses on a Hyundai…" Sad.

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47 Comments on “WSJ on Hyundai Genesis: “it could be mistaken for a Lexus GS460″...”


  • avatar
    Dorian666

    *pictures coffee time at work place*
    “Yep, I got that Regional General Manager’s job. Then I went out went out and bought myself a nice car.”
    “Cool, what did you get ?”
    “Yessirre , got myself a Hyundai Genesis !!!”
    “… ”

    At least they didnt try to play in this car class without a V8. I wonder what the resale on this motor car will be in 3 years ?

  • avatar
    ash78

    If I recall correctly, the first buyers of Lexus were those who precisely wanted to differentiate themselves from the more pretentious German sedan owners. It was the “no-name” budget choice at the time, especially since they used to share so much directly with Toyota.

    So now that Lexus has come into its own, this seems to be The New Lexus. Given the current economic climate, I bet it catches on even more quickly than Lexus (ie, frugality is lauded more now than any time I can remember)

  • avatar
    Steve-O

    Sad, but true. We live in a fashion-plate society, so when someone plunks down $40k+ on a car, I doubt they will be shopping at a Hyundai dealer.

    This upmarket attempt isn’t new: Remember the Mazda Millennia, VW Phaeton, Mitsubishi Diamante…

  • avatar
    seoultrain

    Seems like this may be a more successful Azera. Great car, but people will be unable to get over the Hyundai badge (on the rear).

    But they’ve got to start somewhere. I think this car will help legitimize the quality of hyundai as a brand, and that reputation (and buyers) will trickle down to the Azera and Sonata. It’s a halo car, but one that many people can actually buy.

    Then, once Hyundai is used to building a premium car, they can launch a premium marque and hit the ground running. At least that’s how I’d handle it..

  • avatar
    Airhen

    Who is next? Kia?!

    At least Hyunai sell it under a new badge.

  • avatar
    CT_Jake

    Hyundai is smart enough, unlike the D3, to take a long range view of their business. This is just a start. I have test driven it (V6 version) and it is impressive. It’ll appeal to folks like me who want more than a CamCord can provide but aren’t dumb enough to plop down an extra $18k for a Lexus. I don’t need to prove anything to anyone, so it is now on my short list.

  • avatar
    npbheights

    I think Genesis is a great name for a new, upscale make.
    They aught to just drop the Hyundai name on that car and call their upmarket division “Genesis”

    Take the Sonata, make an upscale version of in for the Genesis Line (like the Camry is to the ES) Price it in the high 20′s

    Take the Azera out of the Hyundai Lineup and make it their mid model Genesis (like a Lexus GS) I don’t think Hyundai needs an Avalon fighter. Price it in the low 30′s

    And make the New Genesis sedan the Top of the fleet (like the LS460) Price it in the mid high 30′s (like it is)

    To me, the current Genesis Coupe does not seem upscale enough for my Genesis Division, especially with no V8 option but maybe version 2.0 could be made as a G37 coupe fighter.

    Maybe keep the division SUV free? If one is deemed necessary the Kia Borrego seems like a good candidate for a Genesis version. I would tread cautiously here.

    This would free up Hyundai to produce lots of nice, quality affordable cars without the worry of diluting their up market aspirations.

    Then open up a Genesis Dealership within 2 miles of the top 20 or 30 most popular Lexus Dealerships. (Maybe they could pick up some former D2.8 dealerships on the cheap?) I think there would be a line out the door. They would be unstoppable.

  • avatar
    Strippo

    I’d say Infiniti, Acura, Volvo, etc., are the real targets here. Those brands aren’t necessarily strong enough to retain their more pragmatic customers in the face of such competition.

  • avatar
    sitting@home

    the car is a Lexus GS460 for nearly $16,000 less ($53,785 versus $38,000)

    Seeing as the target audience is the CPA crowd, they’ll see straight through this reasoning. Residuals on a Lexus (through snob value) will be much higher than Hyundai; if it’s 50% for Lexus after 3 years against 40% for Hyundai, that makes the cost to own $27k vs. $23k. Throw in a bit of tax deductibility for business use and difference between lease/finance payments will be insignificant. Extra warranty is irrelevant for someone who keeps their car only a few years (again the target audience) and an extra $5 a week for premium gas is money well spent when you pull up to the golf pavilion in a Lexus rather than a Hyundai.

  • avatar
    John R

    I think what WSJ and many of the commentators here are missing is that Hyundai isn’t necessarily aiming to spoil Merc, BMW, Lexus, etcetera (if they can get away with that, then that’s great), but rather Chrysler, Toyota, Honda GM and Ford and their non-luxury branded full-size products, ie: Avalon/Maxima.

  • avatar
    Mrb00st

    I guess this is sort of like Phaeton MkII… a great car at a good price for people who want a great car, not a badge.

    I don’t understand the prestige of the Lexus brand, anyway. I mean, I’m 20 and I’ve been on god’s green earth longer than Lexus has existed. They’re still basically gussied-up Toyotas, they still don’t have an interesting bone in their body, and they still drive like crap. But I guess there are still a lot of Americans with too much money and not enough taste. I do like the Genesis, but at least in America I think Hyundai would have been better off creating a seperate luxury brand a la Lexus/Infiniti/Acura/Amati.

  • avatar
    willbodine

    If it really is as good as it sounds, wonder why they didn’t create a premium brand name for it?

  • avatar
    ash78

    willbodine :

    If it really is as good as it sounds, wonder why they didn’t create a premium brand name for it?

    Because Hyundai has the biggest balls in the US auto industry right now. I applaud them for not further segmenting an already unnecessarily confusing mish-mash of names and brand image.

    It’s not whether they WILL be the next Toyonda. It’s just a question of how long it will take.

  • avatar
    aggrazel

    There is a marked difference in quality between dealers who sell luxury brands and dealers who sell economy brands. If you go to a Porsche dealership, be it for shopping or for service, it will be totally a different experience than if you go to your Kia place down the road.

    Quite simply, it is a different client they are catering to, and a different profit margin they live by.

    My wife owned a Hyundai Accent for a few years while she was in college. Any time we took the thing in for service it seemed like they tried to weasel out of their warranty (the windshield wiper motor burned out because you used it in cold weather so we’re not going to pay for it) or the service felt rather cheap. We got higher class service buying oil changes at Wal-mart.

    So does Hyundai know how to treat the high end buyer? I’m sure there are dealerships out there that do, but are these dealerships willing to go the extra mile that the luxury brands do? And will they apply that kind of service unilaterally across all their cars? Or will there be some kind of absurd difference in quality of service based on what model you buy. “I’m sorry Sir, but you bought an Accent, so you’ll have to take the bus back to work instead of the courtesy car that Genesis owners get.”

    This difference in expectation of service is a large reason why people will go with a Lexus over a Hyundai. And it’s why Hyundai really should have created a new brand to get into the luxury market with.

  • avatar
    WaftableTorque

    I’m one of those people cross shopping this car against the A6, 5-series, E-Class, XF, RL, M, GS, STS, MKS, and S80 sedans.

    Prestige is nice, which is why I’m shopping this category. Unfortunately, the Europeans are so consistently awful in their long term reliability studies, I’m naturally inclined to look at Asian brands. Even my Lexus ES300 has a few electrical gremlins, so I find it hard to believe that the European marques could be worse.

    Not having AWD in Canada is likely a deal-breaker for me. But from the reviews I’ve read, this car is softer car than the european cars, which I find way too harsh.

    @Mrb00st, there are many of us who think that sport sedans are not luxury cars.

  • avatar
    Cicero

    Everything I’ve read about the Genesis is positive. However, I think Hyundai is making a big mistake by selling it as a Hyundai. History has shown that brands that have an established image in the mainstream have real difficulties when they try to stretch the brand into the luxury market. The failures of VW, Volvo, Saab and Mazda to gain acceptance for their top-of-the-line models as luxury cars should be a warning.

    Does anyone think Toyota could have succeeded in America by offering a “Toyota LS” for northwards of $45,000?

    As a Hyundai, the Genesis may wind up as a halo car that helps the brand’s image generally, but doesn’t sell in big numbers.

  • avatar
    seabrjim

    I agree CT_jake. I just returned my 06 tl early because I chewed up the 21,000 miles already. This is on my short list, too. I leased the tl becaused I liked it, not to impress my neighbors as a driveway ornament. The volvo-lexus snobbery has subsided as the executive set has realized in a plummeting economy, they can be pink slipped also. If this car existed in october 06 I would not have leased the tl! As far as the dealerships, they are coming around. They know where they want to be and the importance of customer service. If they want to sell cars they cant have a service dept. like volkswagen!

  • avatar

    The reason Hyundai didn’t start a separate marque for the Genesis was, they said, that it would have cost them something like $2 billion to establish a new brand, on top of the development cost of the car itself.

    I think the distinction between the Genesis and the VW Phaeton is that the Genesis is actually priced in a realm where it’s not completely out of reach for open-minded buyers. I agree that the Benz-und-Bimmer set is not gonna go near it, but it’s not out of the realm of reason for Volvo or Acura shoppers. The Phaeton was so much more expensive that even if you liked the idea of a big, generic-brand proletarian luxo-barge, it was out of reach; an S-class price tag, rather than a C-class.

    I’m dubious about the Genesis’s prospects, but at least it’s priced right.

  • avatar
    william442

    Speaking of treatment, have any of you had your Mercedes serviced recently? Hyundai could not possibly be any worse than the MB dealers we use.

  • avatar
    carguy

    I think we need to make the comparisons within the Genesis’s price bracket. So what would you rather have, a Toyota Avalon Limited or a V6 Genesis?

  • avatar
    Paul Niedermeyer

    Cicero: Does anyone think Toyota could have succeeded in America by offering a “Toyota LS” for northwards of $45,000?

    I do. That’s not to say Toyota was wrong in establishing Lexus, but I think they could have sold a lot of LS’s as Toyotas, which is how they were sold in the rest of the world.

    I think Hyundai is smart not to spend the $2 billion to create a new premium brand. With Kia below them, Hyundai can very gradually move slightly upsacle. Remember when Ford came out with the LTD in 1965, followed by the Chevy Caprice? They were solidly in the Pontiac/Olds/Buick price range, and were huge successes. The Genesis will be (at least reasonably) successful too. Ford and Chevy: there’s your LTD/Caprice; eat your hearts out!

  • avatar
    monkeyboy

    Don’t laugh.

    They’re going by the Toyota playbook.

    I remember the LS400 intro. $24,000 for a car of that caliber was ludicrous. They had to be losing $$ on each one.

    Who’s laughing now?

    GM shouldn’t be worried about Toyota. Why? Because Toyota is worried about the Koreans.

  • avatar
    iNeon

    Inconsequential, but couldn’t they have picked a better name?

    Genesis conjures up mental images of Dr Carol Marcus, of Sonic the Hedgehog and of those scary puppet videos. Sehr 80′s. The name itself may turn the buying public off.

    Why was Journey derided as a product name when this name is just as passé?

  • avatar
    romanjetfighter

    People who don’t want the badge and aren’t snobs or don’t want to seem snobby won’t pick this car. This car’s design isn’t understated, modest, stealth-wealth in the Phaeton sense. It’s pretentious, derivative, and is trying to fool everyone it’s a more expensive car (no Hyundai badge, S-class grille, etc. etc.)

    Idk, but at least it’s a good halo car. A luxury car in its own right? Not there yet!

  • avatar
    whatdoiknow1

    The difference here between Hyundai and Toyota is simply that Toyota was fully established as a maker of “rock-solid” DESRIEABLE cars BEFORE they decided to create the Lexus brand.
    Toyota was already successfully selling $30,000+ Supras, $20,000+ Cressida, $20,000+ Land Cruisers, and fully loaded Camrys that also were priced close to or above $20,000 in 1989.

    Before Lexus, Toyota had already built up a league of die-hard Toyota loyalist that were in love with that brand and were actually looking for better more expensive Toyotas.

    While Hyundai is undeniably an “up and comer” today they have NOT built-up a reputation or loyal following the way Toyota had. The mistake with the Genasis is that Hyundai launched it before they brought the new RWD Tiburon to market. The RWD Tiburon IS the break out car for Hyundai that can draw away costumers from Toyota, Honda, and Nissan because it is essentially a product that none of them have to sell now.

    Big Luxury cars tend to sell to established mature folks that do care about “qualtiy” and a reputation of “reliabilty” It is the younger dudes, making a decent amount of coin for their age that will “make the jump” to Hyundai for a sports car. This is the strategy that has worked wonders for the Acura, Infiniti, and Lexus brands and has serverd the parent companies very well. Hyundai appears to be missing that point.

    It is important to remember that the most expensive Japanese cars were all sportcars (300zx, Supra, Starion, RX7)until the arrival of Lexus and Infiniti in 1990.

    Hyundai needs to ask itself why folks did not bite on the bait offered up with the Azera, and consider that the Maxima and Cressida were both extremely successfully product before we had a Q45 or LS430.

  • avatar
    Dynamic88

    I don’t understand the prestige of the Lexus brand, anyway.

    It’s deceptively simple. Lexus costs a lot, therefore, if you can buy one, you instantly get some snob factor.

    BMW tries to sell expensive cars as “the ultimate drivng machine” even though 90% of Bimmer drivers will never push the car any harder than my mother pushes her Impala.

    MB tries (or used to) to sell its engineering prowess.

    IOW, other luxyury makers always give the customer some other “reason” for buying the car. Lexus doesn’t. Lexus simply says -”Hey, this has been engineered by the same people who make the Camry, but we’re charging a lot for it, (and it’s worth it) so if it’s in your driveway, your neighbors will be envious – or at least they’ll know you have as much money as they do.

    Lexus is the only honest luxury car maker. There is only one reason to buy it instead of a Toyota – to prove to the world that you are somebody.

    Well, actually, great dealer service is a 2nd reason to buy one.

  • avatar
    whatdoiknow1

    The appeal of Lexus is due to the fact that they are NOT trying to sell you the ultimate driving machine.

    Most sensible buyers are turned-off by a bunch of BS hype over a product that they KNOW exactly how they intend on using.
    When they buy a Lexus they are simply buying a “luxury” car that looks nice, is well built, has real value that is proven at resale, and is full of all the features they want (that actually work RIGHT). On top of that the dealers are more concerned with how the actual costumers feels about the car they purchased as opposed to to drinking their manufacturers own marketing cool-aide and thinking the costumer should be honored to have purchased a less than reliable expensive snob-mobile.

    Lexus understands that their costumers are buying cars NOT membership in a “special” driving club.

  • avatar
    quasimondo

    I think it looks more like an Infiniti G35, but that’s just me.

  • avatar
    Dynamic88

    whatdoiknow1

    Exactly.

  • avatar
    werewolf

    I was attracted to the Lexus brand for my fiance’s car b/c:
    1) it was a very reliable model
    2) it has a nice interior
    3) it is RWD with a v8
    4) it shares parts and design with Toyota
    - meaning I can do repairs cheaply if I want
    - it’s reliable (did I mention reliable?)
    - electronics are good (cough BMW)

  • avatar
    werewolf

    As for the Hyundai prestige question, it was not that long ago that people badmouthed Samsung and LG electronics…

  • avatar
    healinginfluence

    I agree with whatdoiknow1. People like the notion of the “Ultimate Driving Machine” but it just isn’t the way the vast majority of people drive. Where I live (DC) I see scores of 3 series sitting in the same traffic as Toyotas and Hondas. These cars are all about image and prestige. So is a Lexus but the car does add luxury and is designed for the way most Americans drive which is not the way many Germans drive on the Autobahn. I would add that the Autobahn gets congested too. In my opinion Lexus is an honest luxury car designed for the USA. And so is Cadillac. Hyundai has a lot to offer with the Genesis but it can’t touch the Lexus dealer experience which is part of what Lexus buyers are paying for.

  • avatar

    I sincerely hope this car does well regardless of badge snobbery.

  • avatar
    Geotpf

    I think Hyundai should have started their own luxury division, starting with this car, just like Honda/Toyota/Nissan did. As it is, it’s merely the Hyundai Phaeton, and probably will have sales just as disappointing as the Volkwagen version.

  • avatar
    WalterRohrl

    monkeyboy :
    August 8th, 2008 at 4:26 pm

    Don’t laugh.

    They’re going by the Toyota playbook.

    I remember the LS400 intro. $24,000 for a car of that caliber was ludicrous. They had to be losing $$ on each one.

    If memory serves correctly, the LS400 started at $39,900 in 1991 with Cloth seats, not $24k. The $25000 barrier for a Japanese car was broken a few years earlier by the first generation Acura Legend. Still a helluva deal. I have actually seen one LS400 with cloth interior, but only one. (the cloth was nice…)

  • avatar
    Brian E

    The difference between the Phaeton and the Genesis is that the Volkswagen brand did not need an expensive halo car to lift its reputation, but Hyundai does. Making Volkswagens seem more expensive only further added to the muddled overlap between VW (which was already selling $40,000 Passats), Audi, and the rest of the German premium marques. Making Hyundais seem more expensive while further reinforcing the “value” message has no downside, really.

    If this were only about selling Genesises (?) and future luxury cars from Korea, creating a new marque would be a wise investment. It isn’t about that. The Genesis in the US is Hyundai’s strategic investment into raising Hyundai to Toyota/Honda/Nissan reputation levels – and also serves to provide more breathing room for Kia. The beauty of it is that Hyundai can still decide to invest in creating a luxury marque later if it chooses to. All they need to do is allow existing Genesis owners to service their cars at the new dealerships to make everyone happy.

    Don’t forget that the Genesis also has an important goal for Hyundai in its domestic market. Korean automobiles have not been looked upon very favorably in Korea (hm, where have I heard that situation before?). The Genesis replaces the stodgy Equus sedan (which wasn’t even pure Korean, being a Mitsubishi collaboration) with a good luxury sedan that provides Korean buyers with a domestic option they can be proud of. To put it another way, it’s the CTS of Korea.

  • avatar
    bleach

    werewolf,

    If you are talking about Samsung and LG cell phones, okay. Plasmas and big ticket entertainment products? They are still deserving of bad mouthing.

  • avatar
    BlindOne

    Bleach-

    Samsung LCD/plasma’s are top notch and have been for the last 2 generations. Check out http://www.avsforum.com/ for really good technical info on all brands.

  • avatar
    Pch101

    $38,000 for a Hyundai car is just too much. Without its own branding, this car is destined to generate tepid sales and suffer from poor residuals, which will hurt its future prospects.

    Hyundai has come a long way in improving its products, but is still abysmally ignorant of other business functions, such as human resource management, and branding and marketing. Until they learn how to better manage people and marketing, they are going to remain a second-tier auto maker.

    There is a reason why companies such as Toyota created luxury brands to sell luxury cars — because branding is an important tool for validating the price point in the minds of consumers. Hyundai has established itself as a maker of mainstream cars, sold at a discount. This car clashes with the brand message — the Phaeton analogy is a good one.

  • avatar
    SAAB95JD

    I think that several other posts make this point, but I am going to echo it: This car is NOT going to compete with Lexus, BMW, M-B because it was not designed to. Think Volvo S80, Acura TL, Cadillac STS, Acura RL, Saab 9-5 etc. They are not the big players, but they are the second tier choices for people that DON’T want the really sporty driving experience. I am betting that Hyundai also has pretty low expectations for the sales volumes. If they don’t then the resale value will also be hurt by dumping them on the market.

    The Hyundai DOES seem to be better than all of the previously mentioned competition for comfort, features, warranty and frankly build quality. (I cannot believe I just typed that about a Hyundai).

    I really feel where Hyundai may fall down in this project is dealer sales experience / service experience. Hyundai dealerships are all about moving low-profit margin cars. They make money on volume. A Genesis buyer deserves more, and will expect more. Same for service. It better be red-carpet or forget it.

    I think others have been honest in this regard to, but… BMW’s service experience for me was ok but not great. Mercedes was always terrible and you could not cough in the dealer without spending $1000. For me now, Saab certainly leaves something to be desired. They just simply must get this right or the project will fail.

  • avatar
    ronin

    I guess it’s easy now to forget the situation at the founding of Lexus. Toyota was an up and coming oriental car company that imported cheap cars that had decent reliabiilty. The swells drove Cadillacs or Buicks or Mercedes, not Toyotas, period.

    There was a lot of skepticism about Lexus. Who would be fulled by buying a re-badged Toyota when they could have a real European marque?

    Over time a new generation came up, and the Lexus rep gradually grew.

    Hyundai in the US is almost in the exact same place Toyota was then- maybe not totally mainstream, but with a growing group of loyalists and a growing grudging admiration from the press.

    Hyundai has exactly as much chance making it with Genesis now as Toyota did with Lexus then. Except Hyundai has made a business decision that the expense of re-branding, and all its associated start up, retail, and network costs are not worth it.

    In 20 years we’ll see if they were successful. Lexus obviously was. Infiniti maybe among a few, at least recently when it swerved to target BMW. Acura, unfortunately, has lost its soul.

  • avatar
    Pch101

    This car is NOT going to compete with Lexus, BMW, M-B because it was not designed to.

    With a $38,000 price, it competes against those cars whether Hyundai wants it to or not.

    It is not the manufacturer who chooses the competition. That decision is left to the consumer.

    That’s why this thing is destined for rental lots with that badge and that price. Either raise the badge or lower the price, there is no third alternative.

  • avatar
    Michael Ayoub

    But never mistaken for a Lexus GS350, right?

  • avatar
    neurosonic

    Nobody can question Lexus’ badge weight, but what really sucks is that no one is talking about the evolution – at least the exterior design – of the recent Toyota & Lexus models you’ll find that, instead of introducing a new body design from top to bottom, it’s the other way around. A body design taken from Daihatsu, applied to the Corolla and then the Camry and all the way up to the Lexus models. it is quite shameful that a company with such a reputation cannot come up with a design that clearly distinguishes its self from others in the Auto world, and no Lexus fanatic can deny how the first models of Lexus were mock ups of Mercedes’.
    I don’t like auto companies that thrive only on reputation.

    Good Luck Hyundai !!

  • avatar
    cleek

    “just for that badge on the hood… the fact remains that these cars are immensely popular precisely because they are symbols of money, power and success. The people who buy them aren’t likely to spend their year-end bonuses on a Hyundai…”

    Given that 2008 will be year of “no year-end bonus” in the financial services industry, I’ll bet that, come January, the Hyundai Genesis won’t look half bad.

  • avatar
    capeplates

    No matter what a Hyundi is still a Hyundi – not for me this one

  • avatar
    Cougar Red

    It appears to be a kick-ass vehicle for the price.

    However, how much longer is the public going to purchase 16 mpg cars of any label? Five years? Ten?

    RWD V8s have been the sporting sedan standard for Christmases Past and Present. In Christmas Future, we get to open more and more high performance presents whose cost to operate will make 16 mpg look silly.

    Accordingly, Hyundai’s decision not to launch a new $2B brand around a 16 mpg sedan makes sense. But it will also surely hurt sales of the Genesis as others have noted.


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