Hyundai Genesis sedan debuted in US in 2008

Hyundai Genesis sedan debuted in U.S. in 2008.

Five Years On, Premium Plan Paying Dividends, Hyundai Says

Hyundai U.S. CEO John Krafcik says the auto maker has no regrets about not jumping deeper into the luxury fray with a stand-alone brand.

CORONADO, CA – When Hyundai launched its Genesis rear-wheel-drive sedan five years ago, critics questioned whether the auto maker successfully could sell a near-luxury car under its own brand.

But Hyundai has no regrets about tiptoeing into the premium realm with the Genesis 4-door, and then in 2010 with the slightly larger RWD Equus, says U.S. CEO John Krafcik.

Not only are the two models selling at predicted levels, he says, they are helping bolster the overall brand image and experience.

“We’re one of the most improved brands at retail,” Krafcik tells WardsAuto in an interview here. “We’re ahead of all of our other Asian competitors in terms of sales satisfaction (based on third-party surveys) and I think it’s because instead of putting all our best retail experiences in the ‘Lexus’ store, the ‘Infiniti’ store, the ‘Acura’ store, we’re putting them in all of our Hyundai stores.”

In the U.S., Toyota’s Lexus, Nissan’s Infiniti and Honda’s Acura premium models are sold in showrooms separate from their mass-market sister brands. But Hyundai chose to sell the Genesis and Equus as part of a “showroom-within-a-showroom” format, noting in 2008 the cost of establishing a stand-alone Hyundai luxury brand was $2.5 billion.

As part of this arrangement, Hyundai’s U.S. dealers are schooled in selling the premium-priced Genesis to a wealthier demographic, while 400 Hyundai dealers were hand-picked to sell the Equus to an even more affluent buyer. Krafcik says practices learned by dealers in selling those models have helped them move the more pedestrian offerings from the South Korean auto maker.

Krafcik’s comments come ahead of the refreshed ’14 Equus’ unveiling at this week’s 2013 New York auto show.

Hyundai says it has upgraded both the exterior and interior design of the RWD sedan, as well as advanced safety and human-interface technology.

To further illustrate what he considers the success of the Genesis and Equus plan, Krafcik cites internal data showing that, while the Hyundai brand has an overall 5% market share in the U.S., it claims a 9% share of the segment comprising entry-premium coupes and mid-luxury and premium-luxury models.

“That has brought good things to Hyundai dealerships,” he says.

The Genesis had a 4.4% share in 2012 of the Ward’s Lower Luxury segment, compared with the segment-leading BMW 3-Series’ 12.8% slice of the pie.

The Equus, part of the Ward’s Middle Luxury group, had a 1.7% share in 2012, compared with the 28.6% held by the segment-leading Mercedes’ E-Class.

In total, Genesis outsold the Audi A4 last year, with 33,973 deliveries to the A4’s 30,405, but trailed the 3-Series’ 99,602. Hyundai has said the more sport-oriented Genesis Coupe typically makes up half of total Genesis U.S. sales.

Equus volume last year of 3,972 units placed it near the bottom of the Middle Luxury pack; the E-Class tallied 65,171.

Three-quarters of the trade-ins for Genesis and Equus have been non-Hyundai brands, Krafcik says, with Toyota and Lexus the top two most commonly traded-in brands for each. Traded third-most for a Genesis is Honda, while for Equus it is Mercedes-Benz.

A concept meant to echo future Hyundai premium models, including the next-generation Genesis, was unveiled at January’s North American International Auto Show in Detroit.

The production version of the next-generation Genesis is on tap for the 2014 NAIAS, Krafcik says.

Krafcik discloses Hyundai still is studying derivatives off the Genesis and Equus’ platform, including a cross/utility vehicle and a sedan smaller than Genesis that would compete with BMW’s 3-Series.

However, WardsAuto/Automotive Compass forecast data slates the 3-Series’ competitor for ’15, and rumors are circulating the CUV is imminent, as well.

While sales of larger luxury cars have been contracting in favor of midsize and smaller models, Krafcik insists Hyundai is comfortable with its humble goals.

“You know, our sales aspiration of the 4,000-unit level (for the Equus), which nets us in that segment maybe a 7% share, is probably about right,” he says. “It’s what we did last year and it’s what we’ll do this year. I think we should be OK.”

Analyst Dave Sullivan of AutoPacific considers Hyundai’s luxury experiment an achievement, given how difficult it has been for stand-alone domestic and Asian marques to garner the same level of sales and esteem as German luxury brands.

Sullivan also notes the Genesis and Equus were not designed for the U.S. market, and therefore might not be as luxurious as other competitors.

“I think (with the ’14 Equus unveiling) you’ll kind of get the first dosage of what Hyundai is really capable of doing, in terms of offering a luxury vehicle,” he says, speaking from firsthand knowledge of the car.

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