Hyundai rules out separate premium brand

[YEH]

By HANS GREIMEL, AUTOMOTIVE NEWS on 4/01/2011

Hyundai Motor Co. has ruled out spinning off the Genesis or Equus nameplates to create an independent premium brand along the lines of Lexus or Infiniti, partly because of the enormous cost involved and possible image damage to sibling nameplates.

"There are no plans for Hyundai to make a separate brand," Vice Chairman Shin Jong-Woon said in an interview Friday at the carmaker's headquarters in Seoul, South Korea.

Shin didn't elaborate on Hyundai's decision to keep the top-tier Genesis and Equus nameplates in the Hyundai family. But his comments counter speculation in recent months that South Korea's biggest automaker would follow Japanese rivals in creating an upscale line.

Hyundai considered such a move but ultimately decided against it, spokesman Frank Ahrens said. Executives worried it would cost too much and undermine the image of other models at a time when Hyundai is trying to position the entire lineup as "modern premium."

"It's expensive. Dealerships, marketing, all those things. You don't just spin it off at no cost," Ahrens said.

"Secondly, you've heard us talk a great deal about trying to raise the brand perception. And that's perception for all the vehicles. So how would it help the brands if we were to cut off our top level? We are hoping they will help lift the whole brand."

Hyundai has made rapid advances in quality in recent years. But executives say there is a big gap between their vehicles' actual and perceived quality. Lifting the perception is a top priority.

A more realistic--and cost-effective--alternative to building a new brand would be simply fleshing out Hyundai's upper range with additional models and variants, Ahrens said.

Shin declined to say whether Hyundai might resurrect the idea of a new brand in the future.

Carving out luxury lines from existing brands has met mixed success.

Toyota Motor Corp. scored big by rolling out the Lexus brand in 1989. It is now the best-selling premium brand in the United States, outpacing both Mercedes and BMW. But Honda's Acura brand, the first of the Japanese spinoffs in the United States, has had trouble gaining traction.

Sales of the Korea-built Genesis were up 23 percent to 4,224 units in the year through February. The Equus, Hyundai's highest priced entry, was launched last fall in the United States.

It sold 487 units in the first two months.

http://www.autoweek.com/article/20110401/CARNEWS/110409991

So, it appears that launching a premium brand with the launch of the next gen Genesis and Equus sedans is dead in the water.

Hyundai, can, of course, change their minds, down the road, but for the time being, it seems like it will be a non-issue.

Considering the economic climate, the cost involved in launching a separate brand/dealer network, Hyundai still needing to revamp its current dealer network, the better use of corporate funds to compete in the fast growing BRIC auto markets, etc. - I'd say it's the right decision for right now.

However, I do think Hyundai should place the Genesis, Equus and whatever forthcoming luxury models they have in development in a sub-brand, such as a "HyundaiGenesis" brand (or "Genesis by Hyundai"), but then again, that can just overcomplicate things.

http://www.autoweek.com/article/20110401/CARNEWS/110409991

 

[Gambler]

That's too bad, I was hoping they'd split. While it is probably a good financial decision for them, Hyundai dealers just don't have a good reputation in general. I think that deters people from buying a nice car like a Genesis or Equus there.

 

[tompass]

Perhaps for those who are waiting to purchase, it will be beneficial regarding price if the Genesis remains a "best kept secret."

 

[Ruissimo]

+1, Tom... +1.

Had a picture of a '12 Genny on my screen... my boss saw it, and asked, "what is THAT?"

I said, "What do you think it is?"

He said, "No idea, but it looks amazing."

I told him... "That's my next car - buying it this summer."

"Not on what I pay you..."

It's gonna be AWESOME when I take him out to lunch that first day.

 

[DubaiRich]

Maybe Hyundai will be looking into improving the current dealer network to make the brand even more attractive.

 

[Stoofpilot]

Personally, I agree with their decision. Hyundai makes a great automobile across all lines. They need to spend money on marketing and forcing the dealers to step up to the plate to upgrade their dealerships and the way they treat the customer. New brick and mortar building across the street isn't the answer. They need to start holding the dealers accountable for service and customer care.

 

[Waki]

If they don't improve the dealership experience they are spinning their wheels. I suspect it's the reason we see so few Gennies.....

 

[incontrovertible]

The dealership service departments need to be educated. Number one lesson is that the customer is not the enemy.

I've come in for service on a problem they could not immediately reproduce only to be treated like I didn't know what I was talking about. Lexus would never do that. They would try to solve the problem.

 

[tompass]

ruissimo-
You go boy! I am trying to be patient but it is killing me.

 

[YEH]

That's too bad, I was hoping they'd split. While it is probably a good financial decision for them, Hyundai dealers just don't have a good reputation in general. I think that deters people from buying a nice car like a Genesis or Equus there.

Maybe Hyundai will be looking into improving the current dealer network to make the brand even more attractive.

Personally, I agree with their decision. Hyundai makes a great automobile across all lines. They need to spend money on marketing and forcing the dealers to step up to the plate to upgrade their dealerships and the way they treat the customer. New brick and mortar building across the street isn't the answer. They need to start holding the dealers accountable for service and customer care.

Hyundai's rep. or more accurately, actual CSI scores are pretty good and among the higher for mainstream brands according to JD Power; higher than all of the Japanese brands (almost all of the Japanese brands are below avg.) and significantly higher than Toyota.

But still, good service for a mainstream brand is not the same as good service for a luxury brand (albeit it is questionable the kind of service one gets at a say, BMW dealership, based on personal experience).

Hyundai is busy as it is upgrading their own dealer network, so it probably isn't such a great idea to try to set up an entire new dealer network when they still working on upgrading the mainstream brand.

On the plus side, that means prices on the Genesis and Equus won't go up significantly if they were to be sold under a separate brand/dealer network.

Hyundai may lose some sales by not having a separate brand/dealer network, but they would have likely lost sales as well by the resulting price increase.

How many of you would have bought the Genesis if it had cost another $6-8K grand, even if it had a separate badge and a swanky dealership?

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[MHT]

If my Lexus experience both at the dealership and Lexus customer service had have been as half as good as my Genesis ownership experience I would
still be driving a Lexus.
Hyundai does not have to have an exclusive dealership for the Genesis and Equus to be successful all they have to do is do what they are doing better.
I will take good service over doughnuts, expresso coffee and wide screen tv any day. Sometimes all these fancy dealerships are no more than an illusion and so are some of the over priced cars that they sell.

 

[jeder9999]

I believe that Hyundai is working on the dealership experience. After my 4.6 was in for a recent oil change, the service rep literally begged me to give him a 10 on his survey that would be mailed to me. He said a 9 was equivalent to an F on a report card. I think Hyundai is holding dealers' hands to the fire.

 

[waveman]

I believe that Hyundai is working on the dealership experience. After my 4.6 was in for a recent oil change, the service rep literally begged me to give him a 10 on his survey that would be mailed to me. He said a 9 was equivalent to an F on a report card. I think Hyundai is holding dealers' hands to the fire.

I wouldn't read too much into his request. I've seen that behavior at several dealerships over the years with no correlation to quality. I do think that Hyundai needs to improve its service departments even more than its showrooms - the sales experience lasts days/weeks; the service relationship lasts for years.

In the current economic climate, Hyundai's decision makes sense. And I'd rather see them put resources into improving their dealers and R&D than a costly spin-off.

 

[Seattle Genesis]

Im pretty sure the service reps get paid some sort of bonus based on the rating we give on the surveys.

I believe that Hyundai is working on the dealership experience. After my 4.6 was in for a recent oil change, the service rep literally begged me to give him a 10 on his survey that would be mailed to me. He said a 9 was equivalent to an F on a report card. I think Hyundai is holding dealers' hands to the fire.

 

[Gurkha]

If they don't improve the dealership experience they are spinning their wheels. I suspect it's the reason we see so few Gennies.....

Agree with this from my short experience so far. Most service advisors know very little about the car, I can just imagine what the sales floor is like. YMMV of course, no offence intended to the good ones out there, which I have yet to meet.

 

[dg_moore]

My dealer (Ourisman - 17 assorted dealerships in the DC area) has a shared facility with Hyundai on one side and Mazda on the other, each with separate sales and service staff and facilities.

The building is old and shows its age badly - judging by appearance and amenities they would get a C- at best. But their sales staff is knowledgeable about all of their cars and very low key - no pressure of any kind (except for the finance guy at closing, who pushes all of the useless add-ons very hard but if forced will finally take 'no' for an answer).

On the service side they are excellent - their techs are trained and know the cars, they are up to date on TSB's, the advisors are knowlegeable, they provide loaners and shuttle rides to work if needed, they don't push unneeded services, and their prices are very fair.

Because they share a facility with another make, Hyundai will not authorize them to carry the Equus. They are considering moving the Hyundai operation to property they own next door so they can offer the full line, but it's an expensive proposition.

 

[JustMe]

Maybe I'm different, but to me, the car itself only represents 50% of the equation when buying a car. To me, a great car with a shitty experience at the Service Dept. equals a shitty car.

I don't expect anything from the salespeople when I buy a car, any car. I know the kind of people I'm dealing with and it is only prior to purchasing the car. But the after-sale service I get from the Service Dept. will make or break a purchase.

I have visited 2 Hyundai dealers in my town and I'm not impressed. I can forgive something wrong with the car. I cannot forgive to be treated like an imbecile, a liar and an ennemy to the Service Dept. . I think Hyundai has not understood that yet.

I think Hyundai made a big mistake by not following the example of Toyota with Lexus. Didn't they spend close to a billion dollars developing the Genesis??? People who are willing to spend $50K+ on a car expect service that matches the purchase.

And as far as increasing the cost of the car by $6K - $7K, it already sells for that much more in Canada. Maybe in America it doesn't make sense to create a separate dealership because it retails for about $40K, but in countries like Canada where the price of a Genesis is $50K MSRP, it simply doesn't make a lot of sense to sell them together with some low-priced Hyundai.

Obviously, if Hyundai expects to attract people from Lexus, BWM, Benz and Audi, they should study the way customers are treated at those other brands and try to offer similar. There is more to a car than steel and rubber.

 

[homeofstone]

Maybe I'm different, but to me, the car itself only represents 50% of the equation when buying a car. To me, a great car with a shitty experience at the Service Dept. equals a shitty car.

I don't expect anything from the salespeople when I buy a car, any car. I know the kind of people I'm dealing with and it is only prior to purchasing the car. But the after-sale service I get from the Service Dept. will make or break a purchase.

I have visited 2 Hyundai dealers in my town and I'm not impressed. I can forgive something wrong with the car. I cannot forgive to be treated like an imbecile, a liar and an ennemy to the Service Dept. . I think Hyundai has not understood that yet.

I think Hyundai made a big mistake by not following the example of Toyota with Lexus. Didn't they spend close to a billion dollars developing the Genesis??? People who are willing to spend $50K+ on a car expect service that matches the purchase.

And as far as increasing the cost of the car by $6K - $7K, it already sells for that much more in Canada. Maybe in America it doesn't make sense to create a separate dealership because it retails for about $40K, but in countries like Canada where the price of a Genesis is $50K MSRP, it simply doesn't make a lot of sense to sell them together with some low-priced Hyundai.

Obviously, if Hyundai expects to attract people from Lexus, BWM, Benz and Audi, they should study the way customers are treated at those other brands and try to offer similar. There is more to a car than steel and rubber.

It looks like you are not an owner. If you are what modelo you have?

 

[msitter]

The number I have heard is $1 billion to launch a new brand. I have heard all the moaning about how these cars are now overpriced, how about amortizing that billion over Genesis and Equus sales over even 5 years and see who moans then. At probably 200,000 units over that 5 years you are looking at a $5000 front load into Genesis cost and that is before it is grossed up for profit. Is anyone prepared for a $40k base V6 and a $58k 4.6? As far as Canada goes, buy your cars here and import them back to home and pay your taxes when you register it. I don't think you will be saving much. It is probably a wise decision to leave it all under one tent and spend some resources in dealer customer service training.

 

[JustMe]

I do not need to be an owner to have an idea what kind of service I'm going to get. One just needs to spend a few hours sitting around at the service dept. and see what's really going on. As well as talk to as many customers as possible about their experience with the dealer.

I do not own a Genesis. Though on Thursday I negotiated a price for a 4.6, but then decided not to go ahead after seeing that there are some quality issues that sometimes cannot be resolved and the service dept is not your friend at the two Hyundai dealers I visited.

Like I said, the Genesis is a premium car (at a very affordable price), but it needs a premium service too and I don't see it.