Hyundai Digs In With Refreshed Equus
The auto maker says demand for its first premium luxury flagship has outstripped supply. A refreshed ’14 model is on sale now with a free valet maintenance service that has been skinned back from five years to three.
July 18, 2013
SUPERIOR TOWNSHIP, MI – By any measure, the Hyundai Equus has a long row to hoe in strengthening its roots in the premium luxury-car segment.
Since launching in fall 2010 as the new flagship for the Hyundai brand, the executive-oriented sedan has achieved 8,888 sales in the U.S. That includes 3,193 deliveries in 2011 and 3,972 in 2012, according to WardsAuto data.
But four of its rivals (Mercedes S-Class, Lexus LS 460, BMW 7-Series and Cadillac XTS) have grossly outsold the upstart Equus by a margin of at least 3-to-1. The hot-selling XTS is outpacing Equus sales nearly 10-to-1.
John Krafcik, president and CEO of Hyundai Motor America, says the auto maker has been short on supply of the Equus for the U.S., among other vehicles. WardsAuto pegs Equus at 55 days’ supply, down from 70 one year ago.
Hyundai has 400 Equus showrooms co-located among the brand’s 800 dealerships across the U.S. Krafcik says inventory amounts to one car per dealer.
“The reason they’re not flying out of stores right now is because we don’t have very many,” he tells journalists during the launch of the refreshed ’14 Equus at the Hyundai tech center here.
“It’s another car we are very capacity-constrained on. The demand is there.”
The car is assembled in Ulsan, South Korea. The new model is arriving at showrooms now.
Based on price and size, WardsAuto places the Equus in its Middle Luxury car segment (along with XTS), where the picture grows even more dismal for Hyundai. That segment includes the Mercedes E-Class and BMW 5-Series, both of which have clobbered the Equus by a margin of at least 16-to-1 this year.
Despite lagging rivals, Krafcik says Hyundai is “absolutely delighted” with Equus sales and the brand’s first foray into a completely foreign segment.
“We had initial sales expectations of 2,000 units per year,” he says. “The fact that we ended up 2012 with 7% retail share in that difficult segment in a year when Hyundai as a whole brand was up 5%, I think, is extraordinary. We outperformed our brand share in premium luxury.”
Hyundai’s “showroom within a showroom” strategy for Equus has cultivated the brand in other ways as well, says Ricky Lao, manager-product planning at Hyundai Motor America.
“What we found is dealers are learning from that premium luxury experience in providing an elevated level of service” for owners of other Hyundai vehicles, he says. “It’s had a cascading effect on the brand.”
The 400 Equus dealers account for about 75% of Hyundai brand sales volume.
The auto maker has attempted to “redefine the ownership experience” by sending a flatbed truck and a loaner car directly to an owner’s home or place of business so the car can be transported back to the dealership for service.
“Owning an Equus means you may never have to set foot in our service center. Ever. Not for an oil change, not for a tune-up,” the auto maker says in marketing materials to prospective customers. “We’ll come to you, pick up your car, deliver a courtesy replacement vehicle and return your Equus when it’s ready.”
When the Equus first launched, all maintenance was covered free of charge for five years or 60,000 miles (96,558 km). But recently, Hyundai scaled back that program to three years or 36,000 miles (57,934 km).
Krafcik says other luxury brands cannot provide the same level of service because they deal in much higher volumes.
“Only selling 3,000 units a year, our customer base is really low. We can just smother these owners with delightful experiences,” he says.
“A BMW store can’t do that. Go to any BMW dealer in the country on a Monday morning and look at the pissed off BMW owners trying to get their free maintenance done.”
As Hyundai attempts to market the Equus to potential BMW buyers, Krafcik says they can’t believe Hyundai’s offer to come pick up an Equus needing service and leaving a loaner.
“We tell that to BMW owners and they say, ‘Stop it. Shutup. You can’t do that.’ We do that,” he says.
Additional manufacturing capacity for the Equus and other models – whether in North America or elsewhere – could alleviate Hyundai’s supply constraint, but Krafcik says the auto maker is not yet ready to make an announcement.
Hyundai’s two U.S. plants, in West Point, GA, and Montgomery, AL, are tapped out, each running three shifts, with maximum overtime.
“There’s nothing left,” Krafcik says. “I hear it every day in the cries from dealers to give us more cars, give us more cars.”
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