Hyundai's next-gen Genesis reflects automaker's momentum

April 7, 2014: 11:11 AM ET

Skipping separate luxury franchise saves Hyundai capital, costs brand cred.

By Doron Levin

Hyundai Genesis

Hyundai Genesis

FORTUNE -- Much grousing and cheering has already broken out on social media over the hexagonal grille on the 2015 Genesis, the new second-generation luxury sedan from Hyundai Motor.

Some love the car's new exterior design, some are derisive -- everyone who takes more than a casual interest in cars will notice it.

Hyundai's luxury models are slowly but surely elbowing their way into the consciousness of buyers and enthusiasts. The South Korean car company brought the first-generation Genesis to the U.S. in 2008, selling a small, respectable number of the rear-wheel-drive, midsize luxury sedans.

MORE: BMW bets big on South Carolina

The latest model, built on an all-new architecture, comes with improved versions of the 3.8-liter V-6 and 5.0-liter V-8 engines. Optional equipment includes a slew of high-tech safety and convenience features, such as adaptive cruise control, which maintains speed while safeguarding that the Genesis doesn't collide with a slower-moving car.

In its first year on the market, Genesis sold fewer than 14,000 units, a number that increased to nearly 20,000 in 2013. That's a drop in the bucket in relation to the 250,000 midsize luxury sedans such as the Mercedes E Class, Audi A6, and Lexus ES 350 (TM) sold in the U.S. annually.

Hyundai decided against setting up an entire luxury franchise with its own dealer network. That saved the company time and investment capital, but put it at somewhat of a disadvantage to networks like Lexus, which attract customers who appreciate the extra pampering they get.

"With the latest Genesis matching the [BMW] 5 Series and E-Class on feature content, technology and performance, while substantially undercutting them on price, Hyundai's long-term plan has merit," said Karl Brauer, a senior analyst with and Kelley Blue Book.

As a competitive luxury sedan, Brauer said, Genesis "ticks every box," except brand recognition. As a result, the model is sold at a great value compared to its German and Japanese competitors. Hyundai says the $42,950 Genesis with a 3.8-liter engine sells for $11,740 less than the comparable Lexus GS350 and $17,605 less than the comparable Mercedes E350.

That pricing disparity will attract buyers who figure out they can enjoy luxury features and powerful performance at a 20 t0 30% discount to comparable German and Japanese luxury models.

MORE: A luxury car by ... Kia?

Longer term, Hyundai's goal is to sell its luxury cars at pricing parity to the world's best, an outcome that looks much less far-fetched than it did a few years ago. (Another Korean brand, Samsung, went from being a cut-rate brand of color televisions to a highly regarded one that has helped to push Japan's Sony to the margins.) Meantime, the new luxury car should raise the brand awareness of Hyundai, and its reputation for engineering.

Of his South Korean colleagues, Dave Zuchowski, Hyundai's U.S. president, said "it's hard to describe how hard everyone works and how determined they are to achieve success." In January, Zuchowski replaced John Krafcik in the top U.S. executive post.

Hyundai and its sister company, Kia, now command close to 8% of the U.S. market, just behind Nissan and way ahead of Volkswagen. Later this year, Hyundai will unveil its next-generation Sonata, the family sedan that's arguably its most-important model.

Barring the unforeseen, the Hyundai juggernaut looks poised to keep on rolling, taking business from any other automaker that can't keep up with its energy and ambition.

  • BMW bets big on South Carolina

    The German automaker is investing $1 billion in its factory in Spartanburg, and it will become BMW's biggest manufacturing facility.

    By Doron Levin

    FORTUNE -- The words "auto industry" bring to mind Detroit, Nagoya -- even Georgetown, Ky., the U.S. home of Toyota Camry.

    Add Spartanburg, S.C., to the list of manufacturing hotspots. That's where BMW AG last week announced it will invest $1 billion to build the equivalent of a new MORE

    Apr 2, 2014 5:00 AM ET
  • Meet the North Carolina company behind the lightning-fast U.S. bobsleds

    Located in the heart of NASCAR country, composite-material specialist DeBotech builds stuff for everyone from the Department of Defense to Lamborghini. Now it's helping the Americans win medals.

    By Ken Otterbourg

    FORTUNE -- At the Winter Olympics, technology is everywhere, from the waxing science of cross-country skis to the controversial, skin-tight suits used by the American speedskaters. But the breakout star of the Sochi games might just be the sleds used MORE

    - Feb 20, 2014 5:00 AM ET
  • Cadillac vies for luxury redemption

    Is GM's luxury franchise, once the envy of the world, on the road to regaining its lost prestige?

    Oct 1, 2013 5:00 AM ET
  • Ford's long, hard road to rebuild Lincoln

    Ford isn't ready to revamp Lincoln whole cloth, as GM is doing with Cadillac. But it's taking a few important steps in that direction.

    Aug 22, 2013 5:00 AM ET
  • Who made the better viral video? BMW vs. Mercedes Benz

    Both German luxury automakers have ads on the Web. Which one's more click-worthy?

    By Chip Lebovitz, contributor

    FORTUNE -- Last month, BMW and Mercedes Benz each released online-only commercials within 48 hours of one another. Both quickly went viral, but couldn't have been more different. "The Catch" features the just-released Mercedes Benz SLS AMG Roadster, a Formula 1 driver, and a golf pro. The pro tees up, smacking drive after drive MORE

    Jul 13, 2012 12:18 PM ET
  • London's extreme Olympic makeover

    It's widely expected that London will lose money from hosting the 2012 summer games. But the city's real goals are more abstract: re-branding its international image.

    By Daniel Roberts, reporter

    FORTUNE -- This summer will bring the most sponsored, most spent-on, most visited Olympics in human history. But the real story? A global city is set to re-brand itself.

    London is expected to drop more than $40 billion dollars to host the MORE

    Jun 1, 2012 5:00 AM ET
  • BMW's ultimate Olympic machine

    Any corporation can be an Olympic sponsor. It just takes money. BMW went one better and created a new way for athletes to train.

    By Daniel Roberts, reporter

    FORTUNE -- If you were to head down to your local BMW dealership between now and August, you'd be able to test-drive a vehicle, and if you do it on a "Drive for Team USA" day, BMW will give $10 to the U.S. Olympic Committee MORE

    May 31, 2012 5:00 AM ET
  • A pair of BMW Sevens

    With a six-cylinder engine and a refined exterior, BMW's Seven-series returns to the U.S. with a new attitude.

    With BP's well still spewing oil into the Gulf of Mexico, energy policy and the importance of fuel economy are on everybody's mind.

    Automakers are ahead of the curve on this topic, as they race to meet strict mileage standards coming due in 2016.

    The new standards weigh especially heavy on makers of German luxury MORE

    Jun 17, 2010 1:48 PM ET
  • BMW 128i or Ford Flex: What does $40,000 buy?

    Sometimes the obvious needs to be re-examined. That became clear to me the other day when I looked at the sticker prices of two vehicles I was driving. The two were radically different in size, function, performance, and status. Yet their as-tested prices came within $1,000 of each other.

    For the enthusiast, the price similarity is irrelevant. He buys cars that turn him on, and the monetary value they represent is secondary. Not MORE

    Jul 18, 2008 2:18 PM ET
    Posted in: , ,
Search This Column
View all entries from this: Week, Month
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by VIP.