Birth of a challenger

The Genesis of a marketing shift

JEREMY CATO

SANTA BARBARA, CALIF. From Thursday's Globe and Mail

At 3,000 feet, peering into the murky gloom outside the window of my little twin-engine commuter plane, I catch a whiff of smoke and think of the 1,780 fires burning below across the state of California.

As the New York Times puts it in the paper on my airplane seat, "For nearly a month, firefighters have been tugged from one place to another with little respite."

Today, these fiery blazes are filling the skies with haze, making the summertime coastal fog worse than normal up and down California. At night, visibility at the local airport drops to less than half a mile and it is only with some luck that we manage to land safely.

I am here, of course, not to fight fires or chronicle a tragedy, though both are more top-of-mind than the launch of a new luxury car. From Hyundai.

Of course, the South Korean auto maker can not control the disaster unfolding in the Golden State. But in an industry where image is almost everything, the environmental crisis all around is not helpful for message-making.

Hyundai is, in fact, hoping the fall launch of its first true luxury sedan, followed by a sexy new coupe in December, will be the exact opposite of a tragedy.

Nonetheless, some naysayers suggest the company's timing — with the United States on the brink of recession and the housing marketing crumbling under 2.5 million foreclosures — could not be worse.

Hyundai officials, product planners and designers are naturally taking the opposite view. They believe the 2009 Genesis marks a triumphant moment in the history of a company that has — depending on how you aggregate the numbers and assign ownership — emerged as the fifth- or sixth-largest car company on the planet, with annual sales of about four million.

When talking about the Genesis, they link the sound system to Rolls-Royce, and compare the slipperiness of the design to a Lexus GS and the spaciousness of the interior to a Mercedes-Benz S-Class or a BMW 7-Series that costs three, four, even five times as much.

The Genesis is a wildly audacious adventure for Hyundai.

The optional Lexicon sound system is without a doubt something sold in either a Rolls or a Hyundai. Period. No other car company offers Lexicon sound.

The V-8 engine, a new design and Hyundai's first V-8, is a light, compact and powerful powerplant that Canadian sales and marketing vice-president John Vernile says gets the best fuel economy in its class and will run just fine on regular gas — though the horsepower will drop to 368 from 375.

The Genesis, he says, is a $9,500 better value than an Infiniti M35 and $38,000 less than a BMW 535i. Automotive Lease Guide is giving the Genesis a 50-to-52 per cent residual value after three years, which is very high and superb for customers who want the lower monthly payment of a lease, too.

"We have all the rational reasons for buying the car; we don't have the emotional ones. We working on that," says Vernile.

The linchpin of the rational story is the price. Hyundai Canada is bringing the Genesis to showrooms in September with a base sticker of $37,995 for the V-6 version.

A V-8 comes with a base price of $43,995. Those numbers sound good given what the car is and how it performs. So what's the problem?

The U.S. arm of the company is launching the V-6 car with a $33,000 base tag. Vernile is acutely aware of that and it does speak to some lack of co-operation between the Canadian and U.S. operations.

To discourage cross-border shopping and keep buyers patronizing Hyundai's 169 Canadian dealers, he argues that once you factor in fees and taxes, the price differential is a wash.

That discussion is bound to arise, though, and it undermines the value story Hyundai Canada wants to tell. It's a real story, too, not just smoke and mirrors.

The Genesis is a legitimately upscale, rear-drive sedan and is aimed squarely at cars selling for thousands and thousands more, such as the BMW 5-Series, the Lexus GS, the Infiniti M and the Mercedes-Benz E-Class.

Image-wise, that is.

Vernile, a former Ford Motor Co. veteran like so many working for Hyundai these days, is not so foolish as to think Bimmer buyers will actually cross-shop a Hyundai, even one with this sort of size, power and quality. Those cars are what he's calling the "image rivals."

The real competition, he says pointing to a big chart, will likely be the Chrysler 300 and 300C, the Lexus ES350, Cadillac CTS and most of all the Infiniti G35. All those compete directly with the Genesis on price.

Vernile and his confreres actually have very modest expectations for the Genesis in Canada. In the first year, they hope to sell about 300 cars, with about 270 already on order.

For the full year in 2009, the goal is 1,000 cars. Not much when you consider Hyundai Canada is aiming for 2009 sales overall of about 80,000 vehicles in Canada.

Hyundai will push the Genesis based on its appeal in four areas: quality, value, safety and styling. The quality pitch is backed by consistent showings in recent studies.

For example, Hyundai now has a long list of recommended vehicles from Consumer Reports. In the magazine's most recent auto annual, the Hyundai Elantra was ranked the top small sedan and the Hyundai Santa Fe was the pick for top mid-size SUV.

In the new 2008 J.D. Power and Associates Initial Quality Study, Hyundai had a number of top-performing models in various segments, and once again the brand overall was ranked above average for reliability during the first 90 days of ownership. Better, in fact, than Lincoln, Acura, Buick, Nissan, Volvo, BMW and many others.

Hyundai's challenge with the Genesis is all about image. The brand is still seen as somewhat downmarket.

No one argues that point. And the Genesis will be launched in Hyundai showrooms also filled with Accent subcompacts selling for $9,995.

Vernile chooses to put a positive spin on this. He argues that consumers are looking for "rational buys," that the down-to-earth appeal of the Genesis and other Hyundai models "resonates with the public today."

"I think sometimes we doubt ourselves [at Hyundai], but we have the ability now to sell the gamut" — from cheap and cheerful sub-$10,000 Accents to $50,000 fully loaded Genesis models, says Vernile.

We'll see what the buying public has to say about that.

Join the Discussion:

Sorted by: Oldest first
  • Newest to Oldest
  • Oldest to Newest

Latest Comments

Sponsored Links