By on December 9, 2010

It’s a strange question to ask, considering that Hyundai is already selling the Genesis and Equus luxury sedans, but apparently Hyundai decided to bring out the cars before launching a brand. According to the Wall Street Journal

There are three branding scenarios under consideration. The most likely is to create a subbrand called “Genesis,” and sell the models under the same dealership roof as Hyundai but in a separate part of the showroom, possibly with dedicated salespeople, said John Krafcik, the president of Hyundai Motor America.

The other scenarios are to keep the premium cars badged as Hyundais, or—in the most ambitious move—spin off the brand into separate dealer facilities, much like Lexus or Honda Motor Co.’s Acura

Those are the options, but for a little more context, let’s check in with Hyundai USA boss John Krafcik…

The WSJ reports:

“One of the keys to this plan is how well the Equus does,” Mr. Krafcik said. “We don’t need to make a decision for some time” on the branding question.

Mr. Krafcik said he wants to be open to all options, but has some concerns about spinning off the brand. It would costs millions of dollars to create a new network of dealerships, adding pressure to increase sales for the brand and to raise prices.

He estimated separate dealerships would require the company to obtain about $6,000 more revenue per each car these outlets sold.

And the additional cost is just the beginning: Lexus and Infiniti would probably not have become the brands they are if their vehicles had been launched as Toyotas and Nissans before being re-branded. Bringing in a completely separate brand with bespoke dealers won’t have the same impact if the same cars are stalking the streets with Hyundai badges. On the other hand, if Hyundai does launch a 3 Series-fighter and a RX-style luxury crossover, it will need to do more in the way of becoming a luxury brand… or does it? Is the concept of luxury-style offerings from a value brand completely doomed to fail? Is a sub-brand really any better? Decisions, decisions…

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44 Comments on “Ask The Best And Brightest: How Should Hyundai Sell Its Luxury Offerings?...”


  • avatar
    DearS

    Hyundai, Toyota, Mercedes, BMW, Audi, Nissan, and Honda all sell premium cars in their own markets and some others without a name change. The poor integrity, low self esteem, and general ignorance of America translates to the issue of a luxury “brand”.

    • 0 avatar
      jmo

      Mercedes, BMW, Audi…all sell premium cars in their own markets and some others without a name change.

      Huh? Or perhaps your “general ignorance” is such that you can’t fathom the concept of a premium small car?

    • 0 avatar
      DearS

      I’d actually want an ultra premium light weight car that was not a sports car, and I don’t care if it said Toyota or Lexus on it. Just like I don’t care that Mercedes taxis are so abundant in Europe, and that they offer an E-class ie. 50k sedan here, with cloth seats, four cylinders, and 15″ wheels.

    • 0 avatar
      7

      “and that they offer an E-class ie. 50k sedan here, with cloth seats, four cylinders, and 15″ wheels”
      That cloth seats 4 cylinders e-class will cost you around 40.000 € (approximatively 53.000 $) in Europe… But you’ll get 16″ wheels. So if you mean that Europeans can get cheap e-classes you might be wrong.

    • 0 avatar
      7

      A cloth seats 4 cylinder e-class costs around 39.000 € (around 51.500 $). Not exactly cheap as you seemed to intend. And you see less and less MB taxis in Europe…

    • 0 avatar
      ash78

      7: Considering purchasing power parity, dollars are Euros are within 10% of each other. The direct comparison is flawed.
       
      Even at $40k, it’d never sell well here because Mercedes has cultivated a luxury-only mentality…but I’d love to have a simpler, more reliable, yet still very nice car to choose from without a mass of options.

  • avatar
    hyundaivirgin

    I vote for doing the subbrand (no Hyundai badge on the car) but not having fancy schmancy dealerships. Hyundai can tout passing on the substantial savings to the smart luxury buyer.  It will make them unique and easily fits their natural clientele, the discerning cheapskate. You can imagine commercials poking fun at luxury buyers who enjoy hanging out at the lounge of the luxury dealership more than driving the car.
     
     

  • avatar
    ash78

    Get away from the latter-day Japanese political necessity of a separate luxury brand. ASAP.
     
    If you don’t, you’ll have to build separate dealers and a separate “experience” (warranties, support, etc). Consider making the Genesis more of a “line,” not a brand, with the coupe, sedan, and Equus under the umbrella. Maybe even a high-end Sonata Genesis one day. Think “AMG” but broader.
     
    Weave it all into a single Hyundai experience and upgrade the dealers accordingly. Equus buyers know they won’t quite be getting the white glove BMW treatment, but will be happy they’re paying a lot less. Elantra buyers will be aspirationally thrilled to be shopping in the same showroom as the big wigs…just make sure the dealerships improve beyond the “burnt Sanka and dirty linoleum” reputation they’ve had for a while. This will take money and time, but it’s probably the best option for the brand as a whole.
     
    (FWIW, I think the Equus is a premature offering, but they’re going with it…)

    • 0 avatar
      hyundaivirgin

      It seems to be working already. Per the WSJ article, “Last month, the Genesis sedan, which starts at $33,000, outsold the Audi A6 from Volkswagen AG—which goes for $45,200—in the U.S”

    • 0 avatar
      SVX pearlie

      If you want to talk about Hyundai numbers, year to date, Hyundai sold 26,699 Genesis Coupe & Sedan combined.

      If we’re using combined sales, I think the best counter-example is the Ford F-series, with 473,461 sold year to date. The Genesis is clearly inferior to a basic work truck.

      If you want to compare with other sedans, Chrysler sold 37,000+ Sebrings and 35,600+ 300s. Hyundai Genesis doesn’t even compete with Chrysler in terms of sales numbers.

    • 0 avatar
      ash78

      SVX, I’m not sure I follow you…I thought hyundaivirgin posted a pretty apples-to-apples comparison for the target market Hyundai is aiming for.

    • 0 avatar
      SVX pearlie

      The Genesis does not compete with an Audi A6 any more than it competes with Maybach.

      At best, it competes with a LaCrosse.

    • 0 avatar
      ash78

      SVX: I was going to state something a little closer to what most reviewers say: The Genesis competes (size and amenities) with the A8 and 7-series.
       
      I’m not saying most reviewers aren’t full of crap and prone to believing the company marketing spiel, but that’s the official line from Hyundai. Whether people actually cross-shop the two is a whole different story. Don’t get hung up solely on price.

    • 0 avatar
      SVX pearlie

      @ash: car size and interior materials aren’t the only factors for defining comparable cars. It’s a factor, but Hyundai simply doesn’t compete with Audi from a shopping perspective. The pricing and positioning are just too far apart.

      If you’ve got $45k budgeted for your next sedan, you’re not stopping by the Hyundai dealer to cross-shop the A6 you’re eyeing. You’re stopping by the BMW & Benz dealers, maybe the Caddy dealer.

      Similarly, if you’ve got a $35k hard cap on the family hauler, you’re just not going over to the Audi dealer to see if they’ll sell you a brand new A6 for $35k. You’ll head to the Toyota dealer, maybe even the VW dealer.

      Hyundai competes with Toyota and the other mass-market brands, not a premium brand like Audi. That is why I suggested Buick as a brand they could aspire to compete with. In 5 years, Hyundai might be a second-tier entry-lux brand like Acura / Infiniti / Lincoln. But even that’s going to take work.

    • 0 avatar
      bryanska

      Amen. A sub brand is not needed.
      That is a marketer’s knee jerk reaction. Sub brands are quite risky and oh, so expensive. Just last night I was thinking about the failure of American Eagle’s “Martin & Osa” brand.

    • 0 avatar
      ash78

      SVX, you’re probably right with that assessment, as much as it makes me facepalm. In fact, the savvy consumer in me thinks the person you describe is a complete and utter moron (not you, but the stereotype you describe). I’m still optimistic that people can get over their petty brand image issues, especially given the economy, but it’s an uphill battle.
       
      I’d like to think modern, educated, internet-capable, enlightened buyers would just find the Hyundai Geneis (vs A6) and pocket the extra $20k+ for something else, patting themselves on the back for finding a newer and arguably nicer car than any of the Germans could offer, even in a 3-year-old CPO. I’m assuming your typical “car appliance” buyer here, not someone who is particularly brand loyal to any one company. Too many other intangibles…

    • 0 avatar
      SVX pearlie

      @ash: Agreed. Anybody spending over $35k on a car isn’t doing it merely for the function of moving people from point A to point B.

      Like the BMW / Benz driver, the Audi driver is looking to make a “statement” about himself with the Audi vs the Hyundai, and a very big chunk of that statement is that he can afford to spend $10k more than the guy in the Genesis sedan for a similarly-sized and appointed car.

    • 0 avatar
      krhodes1

      “BMW White Glove treatment”?? Who are you kidding, it’s more like RUBBER GLOVE treatment, as in all the fun of a rectal exam every time you go in for service. I may love BMWs, but I am under NO allusions as to what those fancy dealerships cost.

      Hyundai should put the money into the cars, not the buildings. I could see having a dedicated sales staff for the expensive cars though.

    • 0 avatar
      bd2

      Actually, Equus buyers will be getting the “white-glove treatment” above and beyond what BMW dealerships offer (which, btw, generally isn’t seen as being that great) w/ at-home pick-up and delivery for service calls, Equus or Genesis sedan loaners, not to mention at-home sales presentation.
      @SVX
      The Genesis sedan competes in the E segment/mid-size, luxury segment (GS, M, 5 Series, etc.) despite its current price advantage.

      Remember, when the LS400 was launched, it had an MSRP of $35K which not only undercut the S Class, but a loaded E Class as well – and despite its significant price advantage, it was seen as a competitor to the S Class, 7 Series, etc. (the same w/ the Infiniti Q45).
      The incredibly low MSRP of the LS400 was KEY to its sales success (as well as positive reviews), since Lexus had no brand cache at the time.

      Also, there is a distinction being a brand being “luxury” as opposed to it having a model that is luxury.

      The European/JDM Honda Accord is sold here as the Acura TSX; the Canadian Acura CSX is sold in Japan as the JDM Honda Civic.

      There is no Acura or Infiniti brand in Japan and until 5-6 years ago, there wasn’t a Lexus either (until then, the Lexus LS was known as the Toyota Celsior).

      And the flagship of the Toyota/Lexus fleet is not a Lexus, but a Toyota (the Toyota Century); Toyota also has a series of models (the Crown series) which compete againt the German luxury makes.

    • 0 avatar
      bd2

      Actually, Equus buyers will be getting the “white-glove treatment” above and beyond what BMW dealerships offer (which, btw, generally isn’t seen as being that great) w/ at-home pick-up and delivery for service calls, Equus or Genesis sedan loaners, not to mention at-home sales presentation.

      @SVX

      The Genesis sedan competes in the E segment/mid-size, luxury segment (GS, M, 5 Series, etc.) despite its current price advantage.

      Remember, when the LS400 was launched, it had an MSRP of $35K which not only undercut the S Class, but a loaded E Class as well – and despite its significant price advantage, it was seen as a competitor to the S Class, 7 Series, etc. (the same w/ the Infiniti Q45).
      The incredibly low MSRP of the LS400 was KEY to its sales success (as well as positive reviews), since Lexus had no brand cache at the time.

      The Genesis sedan is outselling the Lexus GS by a 3x margin and the Audi A6 by a 2.5x margin, as well as the new Infiniti M.

    • 0 avatar
      bd2

      Also, there is a distinction being a brand being “luxury” as opposed to it having a model that is luxury.

      The European/JDM Honda Accord is sold here as the Acura TSX; the Canadian Acura CSX is sold in Japan as the JDM Honda Civic.

      There is no Acura or Infiniti brand in Japan and until 5-6 years ago, there wasn’t a Lexus either (until then, the Lexus LS was known as the Toyota Celsior).

      And the flagship of the Toyota/Lexus fleet is not a Lexus, but a Toyota (the Toyota Century); Toyota also has a series of models (the Crown series) which compete againt the German luxury makes.

      Anyway, Hyundai UK is taking steps to launch the Genesis brand in Britain (it’s a lot easier to set up a dealer network of 15-20 dealerships than the 80-100 that is required here).

      Hyundai will look to that and the experience it has w/ the Equus in the US before making any final decisions, but likely, the Genesis brand will appear here (whether in the form of a separate dealer network or as a brand that shares the same dealer network w/ Hyundai).

    • 0 avatar
      bd2

      Hyundai UK is taking steps to launch the Genesis brand in Britain (it’s a lot easier to set up a dealer network of 15-20 dealerships than the 80-100 that is required here).

      Hyundai will look to that and the experience it has w/ the Equus in the US before making any final decisions, but likely, the Genesis brand will appear here (whether in the form of a separate dealer network or as a brand that shares the same dealer network w/ Hyundai).

  • avatar
    carguy

    While I don’t agree with DearS’s sweeping generalizations about Americans, I do agree with his assertion that many brands sell a full range of vehicles from entry level hatch to luxo barge. If Nissan can sell a $12K Versa and a $90K GT-R under the same brand than Hyundai can probably sell a $60K large luxury sedan under it’s own name.

  • avatar
    findude

    One brand. Keep it simple. And laugh all the way to the bank.

    • 0 avatar
      Robbie

      Agreed. Perhaps once SAAB or Volvo is bankrupt again, buy the SAAB logo on the cheap.

    • 0 avatar
      dave-the-rave

      I don’t disagree with the ‘sell them as Hyundais’ stance, but I think the Corvette/Chevy and Viper/Dodge analogies are flawed.
      I think that Corvette is virtually its own brand, and it is certainly thought of as a “Corvette” before it is thought of as a “Chevrolet.” The sins of Chevrolet are not really attached to the ‘Vette, the cheap plastic dash of the recent past notwithstanding.
      The Viper fits at the top of the Dodge lineup because Dodge’s overall mojo is ‘sporty.’ The Viper epitomizes ‘sporty’ and offers a trickle-down illusion— I can’t afford a Viper (or the insurance), but my new Charger has the same genes.
      The Hyundai situation is different because they’re going from “Less expensive because they’re made in Korea” to upscale luxury. What can work for them is if they are, and stay, less expensive than the European/Lexus/Infiniti competition.
       

  • avatar
    Educator(of teachers)Dan

    Separate part of the dealership, not separate buildings or lots.  Better trained salesmen, take your B&B from the Hyundai side of the operation and “promote” them.

  • avatar
    YellowDuck

    Oh for Pete’s sake, who let the MBAs start brainstorming again?  If the cars are really good and really well priced, there should be no problem selling them off Hyundai lots.  Let them help pull up the perception of the rest of the brand, rather than worrying about the (rapidly improving!) rest of the brand pulling them down.  I agree with findude – keep it simple. 

    • 0 avatar
      ash78

      Precisely my recommendation (and I’m “an MBA”…lol)

    • 0 avatar
      mcs

      Exactly. That’s what Nikon does. They use the Nikon name on the $7500 D3x all the way down to the $80 Point and Shoot cameras. If they used just the Coolpix name and left off the Nikon logos, I’m not sure the cheaper cameras would sell as well. Another example is Apple – could you image Apple needing to come out with a premium luxury brand to sell their high end products.

    • 0 avatar
      Signal11

      mcs,
      Apple doesn’t need a premium brand to sell their high end gear because Apple IS the premium brand for consumer electronics.

  • avatar
    akitadog

    What’s with Koreans and Christianity anyways? Name the car, then an entire brand after a book in the Bible? ;)

    • 0 avatar
      Signal11

      Or maybe the book in the Christian bible is merely the English (of Greek origins) of a concept that just means “in the beginning” or “birth”?
      That said, yeah, Koreans got a thing about Christianity.

  • avatar

    Now, that Volvo is trying to escape the crowded dead-end street named “luxury brand” Hyundai might find a place there. But why should they? Why not simply build and sell a good up-market car under a proven logo?
    Krafcik is right when he “has some concerns about spinning off the brand. … It would costs millions of dollars to create a new network of dealerships, adding pressure to increase sales for the brand and to raise prices. He estimated separate dealerships would require the company to obtain about $6,000 more revenue per each car these outlets sold”.
     
     

  • avatar
    don1967

    One brand, one showroom.   People buying a high-end Hyundai are not seeking to avoid commoners while shopping for a car; if anything they want to be seen by the average schmuck as they shop for the most expensive car in the showroom.  Throw in some preferential service treatment and that’s all the snobbery you need.

    As for the old cliche that “Nobody will ever pay $______  for a car with a Hyundai logo”, what are we up to now?  $40,000?  $50,000?  Whatever.  Just wait a few minutes and somebody will pay it.

  • avatar
    darian

    After 15 years of German car ownership – BMWs and Audis and VWs – I bought a Hyundai Sonata a month and a half ago. What a great car, and what a lousy dealership experience. Worse than the lowest VW dealer I’ve been in. If they want to sell cars, they need to upgrade their dealer network and do it ASAP, or the Equus will be DOA and the Genesis not around for long. I really really hope they do it.

  • avatar
    Trend-Shifter

    My marketing plan….

    Tagline:   ‘Buy the future now”

    Sell at existing dealerships. 

    Create a modified “H” Hyundai emblem with a crest to distinquish the vehicle.

    Shazam, you are in business!     If the higher end market doesn’t work out, it would be easy to back out.

  • avatar
    John Horner

    If Hyundai is serious then they need a stand alone premium dealership network. They could, however, add a twist and allow any Hyundai dealer to take care of warranty work. This would help with geographic coverage for warranty work whilst still allowing Genesis customers to get the kind of premium dealership experience one expects when buying and servicing a premium vehicle.
     

  • avatar
    stuki

    Until they actually get around to building a superior product, which per Karesh is still some ways off, just focus on that issue. Worry about the fluff later. The LS400 & Legend were simply meaningfully better than the competition. Which is why people bought them. Not because some self appointed cleveronimous put a magical sales strategy on a deck of PowerPoint slides. And now, two decades, ubiquitous internet information, and a generation of expert/reviewer worshiping indoctrinateds entering the luxury car market, the product is an even more important share of the mix.
     
    Just like what has long been tradition in Europe, Americans, particularly upmarket ones, need someone billed as an “expert” to justify their purchase. And as long as those so billed, in some way, shape or form do live up to their “expert” billing, winning them over means building competitive cars for a competitive price. Which means focusing one’s coin on engineers and manufacturing  workers, not high concept “idea people.”
     

  • avatar
    Davekaybsc

    The Genesis sedan has definitely NOT been lighting the sales charts on fire, and it’s definitely not “basically the same materials, equipment” as even the deathbed, 2005 design A6, let alone new designs like the E-class and 5 series. BMW and Mercedes are not worried, and I suspect that A6 sales will increase considerably when the new model is available next year.
     
    That said, I can cut Hyundai some slack. The Genesis is a first generation (for us at least), product. Who even remembers the first gen Infiniti M45? It sucked. The brands that should be worried are Acura, Volvo, Saab, and Lincoln. The Genesis certainly makes more sense than a Saab 9-5.
     
    Hyundai should not get into a luxury brand. Mazda considered the exact same thing, and wisely canned “Amati” in favor of just launching the car with the Millenia badge. There’s no way an Amati Millenia, or whatever it would’ve been called, would’ve tempted buyers away from ES300s or 3 series BMWs.

    • 0 avatar
      bd2

      Mazda canned the Amati line b/c (1) they were experiencing financial trouble at the time and (2) their US sales could not support/subsidize a new brand/dealer network – unlike for Toyota, Nissan and Honda.

  • avatar
    joeveto3


    Most “Americans” are bent on making the biggest impression they can (not me of course). That’s why people put brick facade on only the sides of the house that can be seen….
     
    These will be the same folks who cross shop the Genesis with the 3 Series. If they think size matters, they’ll buy the Hyundai, status, the 3 Series.
     
    Few will cross shop the A8 (genuinely – sincerely)
     
    In this vain, I don’t believe dealership experience counts for much.  So just sell them next to the Accents.  The oil changes will take place at Wal-Mart or the back yard anyway, where the vinyl clad side of the house gazes.

  • avatar
    Nick

    At first I thought TTAC had managed to get a picture of Tom the Pissed Off Roofer or the guy from Duncan Construction.
    As for marketing the Genesis, just sell’em like they do everything else.   In addition to Sonatas (which are swarming like ants) I am seeing a surprising number of Genesis sedans already.


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