Luxury cars run in Simon Smith’s family. His wife drivesan Infiniti, his mom owns a Jaguar, and Smith, who lives near West Palm Beach, Fla., keeps a BMW Z4 in the garage. But the BMW doesn’t get much love these days. Smith, 47, drives another luxury car, which he likens to a classy European sedan. “The workmanship feels solid,” he says, “and you punch the pedal and it goes.” His pride and joy? The 2009 Hyundai Genesis.
Call it a Korean extreme makeover. Hyundai may be known for budget buggies like the Accent and Elantra, but like Japanese carmakers a generation ago, it’s determined to move beyond the econo-box. And the Genesis is its coming-out vehicle. Starting around $33,000, it’s designed to drive alongside the luxury big boys, equipped with a rear-wheel-drive platform, six- or eight-cylinder engine and a cavernous, leather-sheathed cabin. Plus, it’s a ringer for a German or Japanese luxury sedan, as owners like Smith can attest. “People roll down their windows and tell me, ‘Gorgeous car,'” he says.
The Genesis is a bold gamble for Hyundai, which spent $750 million to develop the car and its new eight-cylinder engine–more than on any other model. The Korean firm hopes it will be a “halo” vehicle, whose aura of prestige will lift the whole brand. To help sell it, salesmen have gone to Genesis boot camp, dealerships have received face-lifts, and Hyundai is running a multimillion-dollar ad campaign to convince Americans that a high-performance Korean car isn’t an oxymoron. “This is a very ambitious company,” says John Casesa, an auto-industry consultant. “They want to do in 10 years what it took Toyota and Honda 30 years to do.”
Hyundai has certainly come a long way since its first U.S. model, the $4,995 Excel, trundled onto the market in 1986. The fleet now includes 10 models, from hatchbacks to SUVs. And vehicle quality, once a punch line, is now seriously good. Hyundai scores above average in J.D. Power’s “initial quality” surveys, which measure problems in the first three months of ownership. The Accent and Elantra rank near the top of their categories. And analysts say that Hyundai’s warranty program–10 years or 100,000 miles–has built confidence in the brand. “People are starting to accept that they make good vehicles,” says Neal Oddes, director of product research and analysis for J.D. Power and Associates.
Yet it’s one thing to sell Sonatas; it’s quite another to muscle in on BMW’s turf. And Hyundai’s timing couldn’t be worse. Car sales are down 13 percent this year, and even luxury brands have begun offering incentives for some models. Hyundai is no longer a wunderkind, either. From 2000 to 2005, its sales nearly doubled, to 455,000, making it the fastest-growing carmaker in the U.S. But since then growth has slowed, and Hyundai has scaled back its goal of selling 1 million vehicles in the U.S. by 2010, aiming now for more than 500,000.
Other challenges abound. Foremost among them: persuading folks to give the car a shot. According to J.D. Power, just 5 percent of new-car test-drivers say they’d consider a Hyundai, let alone a premium model like the Genesis. The road to the luxury-car big leagues is littered with models that earned glowing reviews–and dim sales. (Remember the Volkswagen Phaeton?) Another hurdle for Hyundai is that luxury buyersexpect pampering at the dealership, like massage chairs and black-tie valet service. Indeed, Japanese automakers outgrew their pipsqueak image, in part, by creating separate luxury brands; Lexus and Infiniti lured customers early on by “treating them like a king,” says Tom Gauer, an analyst with J.D. Power. But Hyundai has no spin-off plans, and according to J.D. Power’s 2007 survey of sales satisfaction, its dealerships leave customers feeling somewhat less than royal: The Korean firm scored 22nd out of 36 carmakers for service.
Hyundai National Manager of Product Planning Scott Margason says the “dealer body has gotten stronger” and that the car’s quality and value are what matter–not “a badge and a cappuccino when you’re signing the paperwork.” The Genesis, he points out, rivals the performance of models like the BMW 535i and Mercedes-Benz E350, which cost at least $12,000 more. It’s as spacious as the Mercedes S-Class. It’s quieter, smoother and faster than several higher-end rivals, according to independent track tests conducted by Automotive Marketing Consultants. It’s crammed with standard features like a full leather interior, heated front seats and a hands-free phone system. And it offers a high-end Lexicon audio system similar to one found in the Rolls-Royce Phantom.
Hyundai is so confident the car’s a pound-for-pound champ that dealers have installed touch-screen displays so shoppers can compare it with rivals, and ads show it smoking competitors on the test track. But even converts are still self-conscious about the brand. A handful of Genesis owners we contacted say they removed the Hyundai insignias and replaced them with an aftermarket Genesis “wing” to disguise the car’s lineage. For Robert Shelton of San Antonio, it was “a prestige thing.” The car drives beautifully, he says. “I just don’t want to see ‘Hyundai’ on it and wish they’d take it off.”
Source: Smart Money