Originally Posted by Automotive News
The Book of Genesis: How Hyundai plans to do luxury
SEOUL -- Much at Genesis, Hyundai Motor Co.'s new luxury brand, remains a work in progress, even though the first nameplate went on sale in South Korea on Dec. 18 and will make its U.S. debut in Detroit next week.
It's clear, though, that Hyundai wants Genesis to carve a different path from other premium brands. "We had to come up with our own way, our own unique business model," Cho Won-hong, Hyundai's executive vice president of global marketing, told Automotive News at the carmaker's headquarters here.
During a daylong immersion into Genesis last month, Automotive News had access to the brand's vehicles and spoke with top executives about its strategy.
Hyundai executives believe the automaker has built a reputation for quality that will carry over to Genesis, which will distinguish itself from the Hyundai brand with a focus on safety, while avoiding technology for technology's sake. Genesis' rear-wheel-drive cars initially will be sold in Hyundai dealerships -- that may change later -- but Genesis shoppers will be targeted with a separate customer-care approach.
Here are some of the insights gained into what Hyundai wants Genesis to be, how the carmaker plans to make that happen and what it means for the Hyundai brand. The brand goes on sale in the U.S. in late 2016.
> Brand separation. After 15 years of pondering whether to spin off a premium brand from the mass-market Hyundai marque, Hyundai Motor Co. Chairman Chung Mong-koo greenlighted Genesis in the first half of last year, with the understanding that Genesis vehicles will be sold in Hyundai stores -- for now.
That may not last. After the first six nameplates debut by 2020, executives will re-evaluate whether Genesis needs its own channel, Cho said.
The company knows that launching a separate sales channel is expensive, but cost isn't the only issue. The revolution in digital marketing and sales has clouded the outlook.
"Given the big trend in digital technologies, I'm not sure the physical showroom is still a requirement," Cho said. While that suggests some kind of online retailing, he said all decisions would be carefully aligned with the dealer body.
When the company began debating the pros and cons of a separate network, nobody could have foreseen all the aspects of digital retailing that dealerships grapple with today. The delay may allow Genesis to incorporate a digital strategy early on, if not from the start.
> People. Part of separating from the Hyundai brand means having dedicated personnel. Genesis is gradually building its team.
At the time of Automotive News' mid-December visit to Seoul, the brand lacked a dedicated top executive.
Starting this month, though, Manfred Fitzgerald, 52, former director of brand and design at Lamborghini, will set and execute strategies for Genesis as a senior vice president at Hyundai.
He reports to Cho. Fitzgerald joins Luc Donckerwolke, formerly of Bentley, who will lead the brand's Prestige Design Division as head of the Hyundai Motor Design Center.
> Implications for Hyundai brand. As the Genesis lineup expands, the Hyundai Equus, Genesis and Genesis Coupe will go away, and the Hyundai brand will top out with the Azera, executives said. But they insist the Hyundai brand will benefit from Genesis.
By 2020, the expanded Genesis line will have higher sales.
That means more high-margin vehicles into which the carmaker can deploy advanced technologies and spread costs.
That will speed the migration of those technologies to Hyundai vehicles such as the Sonata sedan. Genesis also will provide a halo for Hyundai, Cho said.
"We saw some discrepancy between what we want to be and the real perception consumers have in the market," Cho said. "We believe Genesis will push it forward."
"Having a separate brand improves the expectations," said Kim Sang-dae, director of domestic marketing at Hyundai Motor.
But the sibling relations can cut both ways.
"Disassociating from Hyundai will also be a huge challenge, as very few consumers see Hyundai as a luxurious brand," said Akshay Anand, an analyst for Kelley Blue Book. "Brand perceptions take a long time to shift, and a luxury brand has to compete against brands that are entrenched in the consumer mindset in terms of prestige, comfort, safety, value."
> Technology and cost. Hyundai executives are aware of the change in perception they are seeking.
"We know ourselves. Our brand cannot be recognized as premium by the customers. We cannot charge that kind of premium," said Yang Woong-chul, Hyundai Motor Group's vice chairman in charge of r&d. "It's about premium performance, not premium cost."
That means devoting limited resources to advanced technologies with utilitarian impact instead of flashy, if gimmicky, features.
"Competitors like to put in new stuff as a world's first, whether the customers really like it or not," Yang said. "It's very easy to add very expensive components, but it adds cost. We are focused on engineering innovation."
Genesis could have used a pricey air-spring suspension to deliver an adjustable ride, Cho said. Instead, engineers found a less costly way to provide the same feel electronically.
A brand is born
Hyundai's new luxury brand went on sale in South Korea on Dec. 18. Here's some of the brand's strategy.
Lineup, now: Starts with the G90, a redesigned Hyundai Equus sedan. It arrives in the U.S. in the second half of 2016.
Lineup, coming: The G80, another sedan, replaces the Hyundai Genesis. Then a G70 smaller sedan, a midsize crossover and a larger SUV or crossover.
Selling points: Luxury-level safety technologies and performance, at less-than-stratospheric prices
Dealerships: Sold at Hyundai stores for now. After the full lineup is rolled out, the company may reconsider creating Genesis stores.
> Product. Hyundai Motor has worked, at times with mixed success, to separate its vehicles from those sold by sibling Kia Motors Corp. Each builds vehicles for the other. Hyundai will have to double those efforts to set Genesis apart.
Generally speaking, Genesis will get the upper-crust rwd vehicles, while Hyundai will keep more mass-market, front-wheel-drive ones.
The Genesis G90, arriving in the U.S. in the second half, will be the new brand's range-topping model.
The lineup will get two more sedans. A G80 will replace the Hyundai Genesis this year. Along with a new nomenclature, the sedan will get a significant freshening.
A smaller G70 sedan is also in the works. Fleshing out the brand will be a coupe, a midsize crossover and a larger SUV or crossover.
With that lineup, "we can reach some customers who are out of reach so far," Cho said. "The first requirement is the product itself."
> Safety. With Genesis, Hyundai Motor enters a new phase of brand development. In recent years, improving quality has been the top priority. Now, the mantra is safety.
"We emphasized quality so much at first, it made Hyundai what it is today. Now, we are putting that kind of thinking into safety," Yang said. "Quality is achieved, and safety is something we'll be representing in our vehicles."
The G90 previews that push with a suite of advanced safety technologies dubbed Genesis Smart Sense. The package bundles smart cruise control, lane-keeping assist and technologies to reduce driver fatigue.
In addition, the vehicle packs an autonomous braking system with pedestrian detection, active blind-spot detection, a driver attention alert system and an around-view monitor.
> Markets and customers. Genesis will be sold initially in Korea, North America, China and the Middle East.
Cho said Genesis will seek "new luxury" customers: young, pragmatic millennials turned off by ostentatious bling.
Genesis has a good chance to scoop them up, some analysts say.
"Auto luxury is no longer reserved for the rich classes, and sometimes, in certain developed markets, younger and less affluent consumers are more likely to afford auto luxury models," said Andy Bae, IHS Automotive's senior analyst for Korea. "Product segmentation and management by age levels and income levels are an essential part to nail down."
Executives are crafting a "human centered" marketing message they hope clicks with them. The goal is to offer upscale functionality without the upscale sticker prices.
> Customer care. Hyundai executives are evaluating a new customer-experience innovation program for Genesis. Cho declined to give details, but he said it will be digital-based, debut in South Korea this year and could hit the U.S. by year end.
One challenge, Cho said, will be training dealers to handle Genesis' product and customers differently from Hyundai's.
Genesis will also get separate customer-care programs. And a top priority will be creating "hassle-free" buying, Cho said. That may involve selecting dedicated salespeople and service technicians within a dealership to be Genesis specialists.
Taking the road less traveled will be key, executives say.
"We looked at all the different luxury car brands for many decades, and there are many which were not that successful," Cho said. "We are thinking of a different approach."
> Why now. Hyundai decided now was the time for several reasons. First, the Genesis name has built equity through the positive reviews of the latest-generation Genesis sedan, launched in 2013. That car's styling cues carry over to the G90.
Meanwhile, the Equus was due for a redesign, and there was a now-or-never mentality about pegging the brand launch to it.
Finally, executives wanted to strike while the market was hot.
The global market for premium-luxury cars will surge 29 percent to 6.77 million vehicles by 2020, from 5.27 million vehicles in 2014, IHS Automotive forecasts.
"The luxury segment has been bullish for the last several years, and I believe this will continue in the near- to midterm," Cho said. "This is the right time to launch a new brand."