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Genesis G90 pricing starts below Lexus LS
<p><strong>Genesis G90 pricing starts below Lexus LS.</strong></p>

Genesis Emulates Lexus, Wants Its Buyers

A key to Lexus&rsquo; early success was its pricing strategy. The Toyota luxury brand launched the LS large sedan in 1989 at 60% of the price of the German brands&rsquo; large sedans.

VANCOUVER, BC, Canada – It’s no surprise that Hyundai’s nascent Genesis brand is closely studying the Lexus playbook.

“It’s easier to say who has been successful at doing this than it is who has been unsuccessful. Lexus is the lone example of somebody who has been successful at doing this,” Dave Zuchowski, CEO-Hyundai Motor America, tells WardsAuto in a recent interview here. “Lexus is just a prototypical, Harvard-business-case study in how to launch a vehicle.”

A key to Lexus’ early success was its pricing strategy. The Toyota luxury brand launched the LS large sedan in 1989 at 60% of the price of its German competitors, Zuchowski says.

The first-generation LS 400, at $35,000, cost 70% of the competing Mercedes 300SEL, priced north of $50,000, Ward’s AutoWorld reported in February 1989.

Now, Genesis is coming to market priced below the competition, including the 27-year-old Lexus.

The ’17 G90 flagship sedan starts at $68,100 for a rear-wheel-drive model with a 3.3L twin-turbo V-6, compared with the $75,520 sticker for the ’16 LS 460 with RWD and a 4.6L V-8.

Even with its optional 5.0L V-8 and AWD, the ’17 G90 is priced below the base LS, at $72,200.

“Luxury buyers really do appreciate the value proposition,” Zuchowski says. “And you see value in a lot of different ways. We have a very difficult time giving people a reason to buy a new, somewhat-unproven product when it’s priced the same as the competitors that have been there for a long time.

“Pricing is nothing more than brand power,” he continues. “And we look at brand power as brand opinion, brand consideration, brand awareness, all those different things. And all of those metrics are lower than our competitors.”

Another way Genesis is copying the Lexus playbook is by hiring some of its top talent.

Former Lexus Product Marketing National Manager Yuval Steiman, a 17-year Toyota veteran, jumped to Genesis as director of product strategy earlier this year.

Hyundai also has Ricky Lao, former Lexus product planner and Connie Kahn, Lexus senior product marketing associate, working on Genesis.

The outsiders Hyundai has brought in for Genesis, both in the U.S. and at the global level, are helping reinforce a Western view of luxury within the Korean automaker, which has been pleasing for HMA.

“It’s just a different perspective and a different voice saying very similar things, and I think that helps get the message (HMA is trying to send to Hyundai top management) across more quickly,” Zuchowski says.

Goal: Continue Wooing Lexus Buyers

In its previous attempts at selling luxury cars with the first- and second-generation Hyundai Genesis mid-large sedan and the first-gen Hyundai Equus large sedan, Hyundai found most of its conquests came from Japanese brands.

“The most (inflow), in terms of trade-ins – the highest percentage by far was Lexus,” Zuchowski says.

It sees that phenomenon continuing, with the HMA CEO noting how difficult it has been for even the 27- to 30-year-old Japanese luxury marques to conquest the Germans.

“We have (had) more success (conquesting) Japanese luxury (car buyers) than we do with German luxury (buyers), for sure,” he says. “And I think we’ll gain more German luxury, but when we look at our source of sales, it’s not a huge piece.”

Zuchowski notes Toyota buyers looking to move up from the Avalon fullsize sedan appreciate the value they have found in the Hyundai Genesis sedan.

“Maybe they’re looking at a (Lexus) ES 300 (midsize 4-door), and (they give us) a look,” he says. “And value is important for those move-up buyers, where (they conclude), ‘I don’t compromise anything. I get the performance, I get the room, I get the technology, I get the horsepower – I get everything I can get in these other vehicles, but I’m getting it for a pretty good discount.’”

Both the ’16 Genesis and ’17 ES start in the $38,000 range.

However, it’s a safe bet Lexus’s U.S. positioning is fine for now. While Genesis may chip away at Lexus car sales, the luxury-car segment in the U.S. already is shrinking as Americans flock to CUVs. And Genesis won’t have a CUV to challenge the Lexus NX or RX for a few years at least.

The forthcoming Genesis compact CUV is sharing a platform with the midsize G70 sedan not launching until early 2018. The Genesis midsize CUV that would be a competitor for the RX will ride on the same platform as the current G80 mid-large sedan and has an undisclosed introduction date.

Zuchowski says the Genesis team is trying to pull the latter model ahead, recognizing the sedan segments are contracting.

While Lexus did respectable in the first part of the 1990s, its best years weren’t realized until it launched the RX midsize CUV in 1998.

WardsAuto data shows Lexus sales went from 63,534 in 1990, its first full sales year in the U.S., to 206,037 by 2000.

Lexus U.S. sales hit a pinnacle last year of 344,601. The RX accounted for 100,610 units of that total.

Genesis predicts U.S. sales of 90,000 units by 2021, when all six of its planned models are in market, including the G90, G80 (formerly Hyundai Genesis), G70, an unnamed coupe and the two CUVs.

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