I saw a short segment on CNBC this morning about Hyundai. Their lead:
Hyundai is cheering the result of a closely watched survey, JD Power & Associates has named Hyundai the highest ranked non-premium brand in its 2009 initial quality study.
That's all well and good, but the conversation took a turn for the unexpected. John Krafcik, Acting President and CEO of Hyundai Motors America, said that they expected to compete in the luxury market. In the clip, they talk about the new Hyundai Genesis luxury sedan, which Krafcik says ranges in price from $33,000 to $42,000. Unfortunately, I think Hyundai will have an uphill battle on their hands competing for luxury customers.
First, in case you'd like to watch, here's that clip. My favorite part is when Joe Kernen awkwardly says to Hyundai's CEO, "I mean this is a nice car. It's not what I think of with a Hyundai":
In the clip, Krafcik also tells us that JD Power ranked Hyundai 4th in overall quality, trailing only Lexus, Porsche and Cadillac. Their Genesis also matched the Lexus in overall quality.
Yet, I'd be really surprised if Hyundai's luxury models outsell many of those other luxury car companies it beat out in quality like Mercedes, BMW or Audi in the next decade. Honda, the company I most closely associate with Hyundai, has never succeeded in the luxury space, though I'm not sure they've made much effort. Toyota has had success with Lexus, but it didn't even attempt to launch the line until 1989 -- well after Toyota was established as a great car company. Toyota also used a separate name for their luxury line, probably to denote Lexuses (or Lexi?) weren't just regular Toyota cars.
The luxury market is strange. It isn't about what car necessary performs best, or even looks the nicest. It's about status and brand name.
No matter how high Hyundai's quality rankings, they need to overcome public perception of Hyundai being a lowbrow brand. The only way to do that is with time, or marketing tricks. Maybe I'm cynical, but I'm unconvinced that the Lexus LS400 would have taken off the way it did if it were called the Toyota LS400. Having a separate name for your luxury line might seem a little gimmicky, but it certainly worked for Toyota. I'm a little surprised that Hyundai didn't try to follow suit.
The point of the Genesis and the Genesis coup is to act as a halo car to raise the perception of the entire Hyundai brand. In time I'd assume they will launch a luxury brand.
Interesting that luxury branding doesn't always work the same way in each country. In Japan for instance they didn't sell Lexuses until recently. The car that was the Lexus LS 400 in the US was the Toyota Celsior in Japan. Today they do sell Lexus brand cars in Japan but the top of the entire line is still the Toyota Century - a nearly always black, discreetly styled, hand built 12-cyl luxury car for the Japanese elite - it slots above the Lexus LS600h in the Toyota hierarchy.
Honda's effort is called Acura, and they're doing reasonably well.
Also, comparable cars from the Germans are significantly more expensive (think $50k base).
I'm skeptical as well (the blatant Mercedes ripoff grill doesn't help), but you've gotta take into consideration alot more factors. Most all of the auto mags (Road & Track, Car & Driver, Autoweek, etc) have all covered this, if you've got some time to kill and a little ambition they usually make for interesting reading.
I live just down the freeway from the Hyundai North America headquarters, so I've followed the release of the Genesis product with some interest. According to Hyundai, they looked at establishing a distinct brand for the Genesis, but the cost of new dealerships, marketing, etc was judged too high for a single product. It is theorized that they will set up a new brand as they bring more products over. Note the reference to the Equus. Also, they have announced that they will be producing their own in house eight speed transmission. In order to cost justify the tranny, they need to sell it across more units than the Genesis will give them, so look for an announcement on the Equus, and possibly a "luxury" V-8 mid-sized SUV/crossover, in the next 18-24 months.
The reason why the Genesis is successful (and it sells more units per month than the Acura RL), is that - with the exception of Jaguar's new XF - the luxury market has become very homogeneous. You get a good V-8, leather, good ride, quiet cabin, etc. The Genesis has all that, as well as arguably the best electronics package in the luxury market (check out the stereo - MUCH better than anything BMW, Mercedes, Audi, or Infinity has). And the price is right, and it looks right.
This reminds me of Volkswagen's Phaeton maneuver. Phaeton was a pretty brilliant luxury car, but I don't think rich people were comfortable spending $60-70K on a VW. The Genesis is more of a mid-market luxury car, though, so it might not be as big of a sales flop as the Phaeton was. On the other hand, I hear VW are planning to bring the Phaeton back, so maybe the experiment will pan out yet.
Although the issue with the Phaeton wasn't just the $70-80k price (twice what Hyundai is asking for the Genesis). It was also that you could get a virtually identical Audi A8. What is the value proposition when you can get the same car, at the same price, from a luxury marque?
The Genesis, however, is priced significantly under the cars in it's segment. The top of the line Acura sedan is over $50k, the Lexus LS (which seems to have been the dynamic bogey for Hyundai) is $70k+, the BMW 5 (V-8) and 7 are $50k plus, and on down the list.
Is the JD Power survey even useful anymore? It only covers the first 90 days. You are only catching the blatant factory defects in that period. I would expect the spread between the different brands to be pretty narrow.
Is there a survey about longer-term quality? I hear comments that American brands have lots of electrical problems as they get older. That's not reflected in these surveys.