Hyundai Sees Luxury Brand in Its Future

LA JOLLA, CA – Hyundai Motor America Inc. may consider establishing a luxury brand, a top executive tells Ward’s.

“We’d probably be silly not to look at it,” Wayne Killen, director-product planning, says here during a test drive of the all-new Hyundai Veracruz cross/utility vehicle. “The case could be made that it makes sense for us.”

Hyundai already has “cut its teeth” in the fierce U.S. market by competing head-to-head with U.S., Japanese and European brands – and succeeding, Killen claims.

Hyundai’s share of the U.S. market grew last year by 0.1 percentage points to 2.8%, compared with 2005. However, sales this year were down 3.1% through February, tracking below the industry’s 2.5% decline.

Additionally, the U.S. market is expected to begin seeing Chinese-built small cars, which are bound to be inexpensive and potentially could cut into Hyundai’s value-oriented market segment, Killen says.

“We need to have an option for those customers who want to trade up from their current Hyundai to a more expensive vehicle.”

But Killen’s conceptual interest should not be interpreted as an official corporate initiative to mimic Japan’s top three auto makers, all of which have been building luxury brands in the U.S. for more than a decade.

Production version of RWD Concept Genesis on sale in second-half 2008.

At a press conference here Thursday, a journalist asked John Krafcik, Hyundai’s vice president-product development and strategic planning, whether the auto maker is considering a luxury outlet. Krafcik says there have been no such discussions at Hyundai.

And yet, HMA officials, including Krafcik, have made it clear Hyundai needs to move upmarket and appeal to a more affluent customer base.

At next week’s New York auto show, Hyundai will unveil Concept Genesis, a rear-wheel-drive V-8 powered sedan (codenamed BH) that is the same size as the Dynasty sold in South Korea. RWD cars with V-8s have been prevalent in the luxury segment.

In his presentation here, Krafcik says Concept Genesis has a firmer chassis than a BMW 5-Series and is proof that Hyundai can appeal to a market that wants more than reliable transportation and a good value.

“We want to extend to more segments but not leave behind the entry-level buyer,” Krafcik tells journalists.

The RWD sedan will go on sale in second-half 2008, he says. “We think this car will be fully equal to the best European sedans,” Krafcik says, adding the challenge is instilling that message in the minds of consumers.

Pricing for the new sedan will begin under $30,000, which represents the top end of the range for the front-wheel-drive Hyundai Azera sedan.

Ward’s segmentation identifies the Azera as an upper middle car, competing with the Buick LaCrosse, Honda Accord, Chrysler Sebring, Mazda6, Mercury Milan, Nissan Altima and Toyota Camry.

Killen sees the production version of the Concept Genesis competing with the Chrysler 300C and Lexus GS 350.

Veracruz CUV part of Hyundai’s push upmarket.

Is Hyundai ready to sell a $50,000 car? “Maybe not today, but we’re not far from it,” he says. “With Genesis and the Veracruz paving the way, that could be in our future.”

Pricing for the new front-wheel-drive Veracruz, derived from the Santa Fe CUV architecture, begins at $26,995 and tops out at $38,000, with saddle leather interior, all-wheel drive and DVD player.

Primary competitors for the Veracruz are the Honda Pilot, Toyota Highlander and Subaru B9 Tribeca. But a secondary competitor is the Lexus RX 350.

For comparison purposes, journalists here were offered a chance to drive the RX 350 back-to-back against the Veracruz.

In a series of clever new TV commercials, Hyundai proudly proclaims its vehicles match up favorably with nameplates from Lexus, BMW and Land Rover and cost a lot less.

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