The Hyundai Equus Story by John Krafcik

[YEH]

While a story about the Equus - has a lot of details about the development of the Genesis (which I'll also put in the Genesis forum).

The Genesis of a Premium Model

The story of Equus begins with its platform-mate, the Hyundai Genesis. When I joined Hyundai in early 2004, the company had already begun the planning for this bold product — a rear-wheel-drive, premium sport sedan designed to take on the BMW 5 Series, Lexus GS and Mercedes-Benz E-Class. We ended up spending a much longer than usual amount of time in the product development process with Genesis.

Why? Well, we had a lot to learn, for one thing. Engineering a premium rear-wheel-drive platform brings a unique set of technical challenges compared to the front-wheel-drive platforms we'd grown quite capable of developing. And the Genesis program included our first homegrown V8 engine, known as Tau.

Yes, Genesis was a big deal internally, and there was an extraordinary focus to ensure we got things right. We had the time we needed and the budget we needed to design and develop a flexible, world-class, rear-wheel-drive platform that would eventually spawn at least three unique products. These were exciting times at our global research and development facilities, and we were extremely focused on delivering products that would wipe clean any preconceptions about what Hyundai was capable of doing.

The Genesis of a Premium Brand

That focus manifested in many ways. One was exterior design. There was a lot of internal debate on design direction for Genesis. We used a European design house as an early consultant, and its proposals informed the core design elements of the first approved exterior model, which got as far as the tooling stage. In our industry, when you've built tools to stamp the exterior sheet metal, you've committed millions of dollars, and so you're pretty much committed at that stage to bring that design to market. But in the end, we weren't happy with the design. So we made the right decision (albeit a difficult and expensive one) to redo the exterior with a cleaner, more athletic and more enduring design, homegrown from our own design studio. And with that decision, Genesis went from looking like this : to this.

At the same time that we were overhauling the exterior design, we were refining driving dynamics, which involved targeting a sportier feel differentiated from the isolated feel of many luxury sedans. We were also working out the retail strategy. Internally, there was debate around three different retail options: launching as we did, with Genesis sitting atop the Hyundai lineup and sold through Hyundai dealerships; creating a separate retail channel like Acura, Infiniti and Lexus; and developing a hybridized approach with a unique Genesis brand sold through Hyundai dealers.

In the end, the decision to launch as we did put primary focus on Genesis, providing a halo for the entire Hyundai brand. We got lucky here as well. With the Great Recession coming just a few months after the Genesis launch, a stand-alone retail channel would have been a difficult financial burden for our dealers to support. New stand-alone dealerships can cost anywhere from $5-$75 million and we avoided those costs for our dealers. And winning the North American Car of the Year award in January 2009 gave us a key communication platform to ensure American car buyers understood that Hyundai could engineer vehicles that compete with the very best.

In our business, many automakers speak of halo products, but it's rare to see a product truly delivering a halo benefit to the brand the way Genesis has done for Hyundai. In fact, last year, out of all the creative marketing approaches we used to help drive our success in a tough year for the industry, no communication message was more effective in improving buyer consideration for the Hyundai brand than the North American Car of the Year award for Genesis.

Market Success for a New Image

Beyond the halo value to the overall Hyundai brand, we've also been pleasantly surprised by the market success of the Genesis itself. It has captured a 6.3 percent retail market share of the mid-luxury market this year, putting it in 4th place in this highly competitive segment, behind only the Lexus ES, Mercedes E-Class and BMW 5 Series. It's ahead of the other 14 entrants in the segment, including the Infiniti M, Lexus GS, Lincoln MKS and Audi A6.

That 6.3 percent retail share is even better than the 4.9 percent share of the retail industry that the overall Hyundai brand is delivering. According to J.D. Power's most recent Initial Quality Survey, had we launched Genesis as its own brand, it would have tied Lexus for the best quality in the industry. Automotive Lease Guide's guidebook for May- June 2010 shows that Genesis has residual values on par with the Mercedes E-Class and better than the Lexus GS, BMW 5 Series, Cadillac CTS and STS, Lincoln MKS and Infiniti M. And the product mix has been incredibly rich, with over half of all Genesis' sold to date going out the door with sticker prices over $40,000. Our V8 engine mix runs around 45 percent — the highest optional V8 engine mix in the segment.

Now, to the Equus.

A Halo for the Brand
Taking the product, the brand and the customer experience a step further, some of you may ask a fair question: "So I see Hyundai is happy with Genesis. That's great. But why bother going any further up-market? Aren't you just going to re-create what happened with VW and the Phaeton?"

The simple answer here is "No."

Let me explain the differences between what we're doing, and how we're doing it, compared to VW's approach with its Volkswagen Phaeton.

First of all, with Genesis, we've demonstrated there is a remarkably large group of consumers already comfortable spending over $40,000 for a great car, with great quality and residual value, wearing a Hyundai badge. At the time of the Phaeton launch, VW hadn't had this type of validation from American consumers. We've found that our early Genesis buyers are smart, affluent and self-confident. They don't need the social approval that a traditional premium badge provides to some, and in fact may be turned off by the unique kind of reverse social stigma a premium badge carries in some circles, especially in uncertain economic times like these.

In many ways, Genesis buyers resemble the first group of Lexus owners in the early 1990s. Like those buyers, today's Genesis owners see the extraordinary value their car provides versus the competition, and their discovery of this value by itself is very appealing to them. So now, looking forward, we've got a large group of Genesis owners who are delighted with the car (it won the J.D. Power APEAL award for its segment, and has won two consecutive AutoPacific Vehicle Satisfaction Awards in its segment), and are already comfortable with the idea of a premium Hyundai product. Hundreds of them have already contacted us on their own, inquiring about the new Equus.

Now compare the price walk from the car below Phaeton in the VW lineup, the Passat (average MSRP of under $25,000 back in 2004) to the base Phaeton price of about $65,000, with a fully optioned price of (gasp, what were they thinking?) over $100,000. That was quite a gap to bridge in their sedan lineup. (For you uber-enthusiasts who remember the $40,000 Passat W8, keep in mind that VW sold only 268 of them through the first eight months of 2004, about 0.6 percent of Passat sales during that period, before production was ended.)

At Hyundai, we're looking at an average Genesis MSRP of $40,000 right now, an incredibly well-equipped Equus starting price in the $50s and a fully optioned price less than $10K more. We think that is a much more manageable price walk.

Low Volumes, High Aspirations

A key enabler of success in achieving our objectives with Equus is the simple fact that our sales expectations for the car are modest — just a few thousand per year. So instead of an unrealistic volume objective as a key business driver, we have just two key goals in mind for Equus: show the world we can build a flagship sedan that rivals Lexus LS, BMW 7 Series and Mercedes-Benz S-Class, and in so doing build further confidence in the Hyundai brand with a broad audience of car buyers; and pilot several breakthrough customer experiences for Equus owners that will differentiate us from the luxury pack and enable rich learning opportunities within our Hyundai retail network.

http://www.insideline.com/hyundai/equus/hyundai-the-equus-story-by-john-krafcik.html

 

[BacktoHyundaibychoice]

I like that bolded line. Weren't they expecting an 80-20 split originally?

 

[aja72]

Interesting read.....