LexFather

http://www.autoweek.com/cat_content...._code=09846617

By PETER CHANGE AND MARK RECHTIN
Automotive News

SEOUL -- Hyundai Motor Co. aims to set up a luxury sales channel in the United States as early as 2007.

South Korea's upwardly mobile carmaker is developing a luxury sedan in a plan to mimic Toyota's Lexus and Nissan's Infiniti offshoots.

"Basically, our plan is to launch a brand that is strong enough to compete with BMW and Audi and Lexus," says a senior executive in South Korea. He says Hyundai wants to establish the channel in the United States "in three or four years."

Hyundai's quality has improved, and its U.S. sales are rising. Sources at Hyundai Motor America say parent company executives believe the time is right for a prestige brand.

"It's more a question of when, not if," says a Hyundai Motor America official who asked not to be identified. "Hyundai's next generation of Korean-market luxury cars is arriving in 2007. They don't want to wait for the generation after that to launch a luxury brand in America."

Hyundai engineers are tearing apart BMW and Mercedes models to better understand European luxury cars, according to the U.S. insider.

"We are now developing a 3.5-liter rear-wheel-drive luxury sedan that will be offered with the luxury brand in the U.S.," says a Hyundai source in South Korea. "The development is in an initial stage in the Namyang r&d center. We hope it will greatly enhance Hyundai's brand image in the U.S. market."

He says the sedan will fill the gap between the rwd, V-8-powered Equus sedan, which is sold in Korea and Europe, and the XG350, which tops Hyundai's range in the United States. The new model will be sold in the United States and Europe through a Lexus-like channel. But it will not be the only model in the luxury lineup.

A high-line sales channel long has been an element of Hyundai's U.S. expansion plans. Now Korean executives think it is time to act. Sales have been growing, and Hyundai's brand image got a big boost from a strong showing in the J.D. Power and Associates Initial Quality Study in April.

Another Hyundai Motor America official - who declined to be named - was cautious about the time frame. He called a 2007 launch "optimistic" and said it could occur as much as two years later. He says Hyundai Chairman Chung Mong-Koo is aware the main brand still needs time to build credibility in the United States.

"But there's only so far we can go with the Hyundai brand," the official says. "To be a full-service car company that wants to be in the global top five or six automakers, we have to go upmarket. There's money to be made there. It's just that there's a ceiling for how much someone will pay."

Although South Korean executives have mulled the idea for a long time, Hyundai officials in the United States have been reluctant.

"Hyundai Motor America has been able to forestall it until now, but the Americans will probably get a luxury brand before we're really ready for it," according to a U.S. source.

But he adds: "The Koreans are not fools. They know the financial challenge and marketing challenge of launching a luxury brand here."

The luxury brand likely would have to have at least three vehicles at the outset, the source says. The lineup also might include the 2007 redesign of the 4.5-liter Equus.

Because it is equipped much in the Korean style, the current Equus is not considered ready for the global luxury wars. Engineers are trying to make it more like a BMW or Mercedes.

"Hyundai is trying to make a global luxury vehicle, not the typical Asian luxury boat," a Hyundai U.S. executive says. He says the Equus was delayed from 2005 until 2007 because it was "too Korean."

A Hyundai executive in Korea says Hyundai hasn't decided whether to sell Equus in the United States alongside the new 3.5-liter sedan.

Some U.S. dealers are wary of Hyundai's quest. Don Hicks, who owns Hyundai, Kia, Subaru and Suzuki franchises in the Denver area says it is hard for a luxury brand to take hold.

"A lot of Acura guys came and went in the first wave," Hicks says. "Denver has been able to sustain just one Infiniti store. So we need to learn from history. A standalone facility for a Hyundai luxury car might be a stretch, even though Hyundai has made great strides and gotten great press.

"I'd rather they concentrate their efforts on giving all Hyundai dealers a truck," he says. "I think we could sell more trucks than luxury Hyundais."

-J-P-L-

I don't think it's such a good idea. Selling in the Luxury segment is very difficult and you either need a history of prestige or offer the very best. Who's going to cross shop a Hyundai brand with a Lexus, BMW,or Benz? If it's going to work then they'll still be selling based on value and this will never earn them prestige.
I think realistically, they won't be successfull anywhere past "entry-level" luxury ($32,000 area).

Gojirra99

I'll have to see the product first, but there's nothing wrong with being "based on value" that's how Lexus got started, & it's still true compared to traditional European brands, just less so than when it began years ago. I agree though they should be contented to be challenging Acura first before MB, BMW & Lexus.

videcormeum

This is interesting b/c I just recently had a conversation with a friend regarding Hyundai's offerings and the new Kia vehicles that are coming out - including the Amanti.

I don't really understand why Hyundai keeps introducing direct competition to their products with Kia's line-up ... it seems to me that by moving one of the marques slightly above the other one - they could create more synergy in sales than currently exists between them.

Hyundai ---- Kia
-------------------------
XG350 ---- Amanti
Sonota ---- Optima
Elantra ---- Spectra
Accent ---- Rio
Santa Fe ---- Sorento

And of course the Hyundai Tiburon and Kia Seeedoooona (which is how radio commercials would have us all pronouncing it).

Anyway - Hyundai's got some really nice - IMO - sedans over in Korea that with a little freshening could easily debut here and probably sell nicely.

Here's the Dynasty sedan - which - in current form may be a bit too awkward for mass (US) market - but I like it








See Next Post ...

videcormeum

And here's the Equus sedan - which looks REALLY nice.

Notice the 4.5 liter V8 .....







Equus Executive/Limo:

mmarshall

I saw the Equus a couple of years ago when Hyundai displayed it at the Washington, DC Auto Show.
They have obviously made some changes to it since then......the most noticeable is a much lighter wood trim for the interior. Hyundai officials were undecided then about offering the Equus in the American market. The American public was just then beginning to accept the $25-28,000 XG300 and XG350. But a FORTY-K Hyundai? That may have been pushing it...so naturally Hyundai brass was (and is) a little leery.
I don't know this for a fact, but my educated guess is that they are watching the sales of the VW Phaeton (slow at best) to gauge the tempo for a true Hyundai luxury car.

videcormeum

I dont know - the Phaeton is certainly almost double the cost of the Equus.

My guess is that they are probably testing the waters now with the Amanti and continued XG sales.

And as I understand it, those are both doing fairly well.

Of course things change in the $35k+ market - I don't know if a highly competent sedan without any brand cachet would stand a chance ... it'll be interesting to see.

Ohhh - but if the Hyundai luxury marque's symbol ends up being that cool looking bird as on the Equus' steering-wheel

mmarshall

Yes, the Phaeton is more expensive than the Equus but the principle is still the same.....a way-upmarket luxury high-end model from a traditionally low-priced manufacturer. This is working out well for VW in the SUV market with the Touraeg......but the Phaeton's future is more doubtful.

videcormeum

Agreed.

I understand that concept - but I still think that a $35k sedan has more potential (sold under a less prestigeous marque) for solid sales than a $60-90k sedan.

More people can afford the $35k offering - regardless of who's building it.

SecPole14

Those Hyundais are bad-*** (relatively speaking). Especially now, if the Koreans give us a $40K car, there's going to be a lot for the money. I'd hit it, especially if they were RWD...

Peeps need to watch out, Hyundai is going places.

mmarshall

Yes....Hyundai's fit-and finish and general overall quality, while still not quite to Lexus standards, beats that of many vehicles costing far more. I would, today, buy a Hyundai before I would many other vehicles with a domestic or German nameplate....and I am being honest.....that is not an idle statement.

RA40

iTrader: (6)

The Equus sedan has some lines of the UCF20/21 LS400. It will be interesting to see what their luxo car will feature when released.

SecPole14

And that's not a bad thing. It looks quite stately and Asian, actually...

J.P.

They should spend more time building their brand before they jump to this.

Plus, don't they already try to market a luxary car on a budget price? kind of silly cross marketing to me

nthach

I see Ford and Lexus influence in the Eqqus...

Hyundai is on a roll as of late, the Tiburon and Santa Fe are quite impressive.