Establishing a Hyundai Kia Luxury Brand, Oppo Point-Counterpoint.S

Now for something a little different. Arch Duke Maxyenko and I decided to write an article about whether or not Hyundai/Kia should establish a luxury marque in order to help it's Equus, Genesis and K900 luxury sedans succeed.

The format will be debate-style, point-counterpoint. We each took a side; I am "for" establishment of a new luxury brand, Arch Duke is against. Oddly enough, instead of having to take up a point we didn't believe in, we both actually believe in our for/against stance, which made it easier. I'll go first, since I'm typing right now. My submissions have some input from Right Foot Down, our resident Cadillac critic.


Premise 1: Hyundai/Kia cannot, and will not, be luxury brands, and therefore needs to establish a new luxury nameplate.

By Thedriver and Right Foot Down.

Price Disparity

At least I do not think they can as long as they sell the Accent, Rio, Elantra, and Forte. Good cars to be sure, but certainly not associated with anything premium. It is my assessment that buyers will not want to arrive at a dealership to plunk down $61,000 plus for an Equus when the person next to them at the finance desk is buying an Accent hatchback for less than $15,000.

2014 Kia Cadenza

Establishing a Hyundai Kia Luxury Brand, Oppo Point-Counterpoint.S

Brand Image

The same reason highlighted above regarding price disparity also contributes to the issues with brand image. Selling one of the cheapest cars on the road in the same showroom next to a $60K luxury sedan will confuse buyers at best, and at worst keep them from buying the Equus and K900 altogether. Buyers of large luxury cars are partially buying a nameplate. They want their neighbor to go, "nice BMW Bob" and mean it. That sentence can still be uttered, but "nice...Kia Bob" will be said without the reverence of scenario one. Sure, a new nameplate won't necessarily have the cache of "Cadillac" but it won't automatically get associated with a down-market name that has a spotty past. And we've already heard about issues at Hyundai/Kia dealerships.

Lexus does well because it doesn't have a Toyota badge. Others have had success, Acura and Infiniti come to mind (less so recently I suppose), because none of their more mundane brands could have jumped in to the luxury scene in America under true names. To prove the theory it would be interesting to poll visitors at both of these dealers to see what percentage know of the brand under the badge.

Quality

When Toyota created Lexus in 1989, their mainstream brand already had a reputation of quality and reliability. Hyundai, and by association Kia, still suffers, from images of the unreliable econoboxes they produced in the 80s and early 90s. While most mainstream car magazines, along with Consumer Reports and JD Power, have rated them much higher in initial quality and reliability, they still have some work to do to fight back against that image.

2012 Hyundai Genesis 5.0 R-SpecEstablishing a Hyundai Kia Luxury Brand, Oppo Point-Counterpoint.S

So, How do the do it?

When Lexus was created, Toyota spent over 5 years secretly developing the LS400 and it was truly a game changer. Hyundai has already shown it's hand with the Genesis sedan, Equus, K900 and to a lesser extent, the Azera/Cadenza. It's time to bite the bullet and start to develop their dealer market to the point that it can handle another brand. Again look to Toyota, they do it all the time (relatively speaking) both up-market with Lexus and down-market (or at least off-to-the-side-market) with Scion. Toyota does it slow and deliberately (sounds dirty, I know).

Model Development

As mentioned above, they have already started. The Genesis, Equus and K900 already exist. And they are good. And they are already taking up real-estate in showrooms and dealership lots. It's time to expand that. Lexus has close to a dozen models at this point, which took some time obviously. The ES sells well, and we all now it's a Camry. No time like the present, let's get going Hyundai. You have the right platforms, do what Toyota does, share across the brands.

  • Equus/K900 - They share a platform, either ditch one or differentiate between the two in some way. This is their Lexus LS, 7-series, A8.
  • Genesis - take it further up-market and keep it sporty, ala Lexus GS, 5-series, etc.. The 2015, pictured below, looks like a step in the right direction. The Genesis should fill the gap between the entry-level $30K option and the $60K plus Equus/K900.
  • Entry Level $30K car - Think Lexus ES, I think you could easily build this from a Azera/Cadenza. Heck, even the Sonata is a great looking car, it has the bones to be a pretty decent entry-level luxury car. Do what Toyota does to the Camry, put a new body on it, upgrade the interior, and maybe offer AWD vs. just FWD. People will buy it, especially the 40MPG Hybrid.
  • Luxury SUV(s) - Start with a Santa Fe or Veracruz and do the same treatment Toyota does with the Highlander to RX conversion. New body, better interior, done.

2015 Genesis Sedan

Establishing a Hyundai Kia Luxury Brand, Oppo Point-Counterpoint.S


Premise 2: With all of the current players in the luxury car game, there is no more room for a new brand to thrive.

By Arch Duke Maxyenko.

With all of the current players in the luxury car game: BMW, Lexus, Mercedes Benz, Cadillac, Audi, Infiniti, Jaguar, there is no more room for a new brand to thrive. This isn't the '90s anymore; could there be any room for sales of a new luxury brand that isn't exciting and different like Tesla? Let's take a look at current sales figures to see if there is even a business case to built a 3rd brand.

Sales Figures Enough?

Below are the Year-to-Date sales numbers for luxury automakers:

MakeYTD Sales
Audi141,048
Acura149,685
BMW271,891
Cadillac164,378
Hyundai Genesis & Equus32,276
Infiniti103,223
Jaguar15,408
Lexus239,090
Mercedes298,509
Tesla14,046

Are 32,276 sales from 2 (soon to be 3) models enough to justify a new brand? I would say no.

Dealership Network?

Would the current crop of Hyundai and Kia dealers be willing, or be able establish or financially support new dealerships for a separate brand? Unless they were guaranteed new products to bolster a full line, probably not.

Innovation?

If they do create a new brand, it will not last long unless it can bring something new to the market that is not just low price and great warranty. Until they can, they should just keep selling them at the Hyundai/Kia dealers, and actually sell them with Hyundai/Kia badges all around and stop pretending that they aren't, I think that alone would help them stand out from the crowd.

2014 Hyundai Santa Fe

Establishing a Hyundai Kia Luxury Brand, Oppo Point-Counterpoint.S

Internal Competition?

The establishment of a new brand would mean even more dilution of the Hyundia/Kia branding. How did that work out for Ford, and GM? Ford was to Mercury, like Chevy was to Pontiac, Olds was to Buick, and like Hyundai is to Kia. Yes, Hyundai's and Kia's have different body panels, but they are the same cars underneath. The current crop of Hyundai's and Kia's is already far to similar and they have not differentiated the brands whatsoever, so the addition of another brand would cause even further confusion.

Establishing a Hyundai Kia Luxury Brand, Oppo Point-Counterpoint.S

If they need another brand just for luxury, why not brand the higher up cars as Hyundai's and use Kia as the mainstream or the other way around? There you would have an established name and reduce the expense and confusion of a 3rd nameplate.


Summary

We all believe that, in order to be successful selling luxury vehicles, Hyundia and Kia needs more upscale product. Regardless of whether they sell them side-by-side in current Hyundia/Kia dealerships, or via a newly established nameplate, they should use current platforms and intellectual capital to expand their over-$30,000 offerings. If they can truly offer what Lexus did in the late 80s, a superior, more efficient product, for less money, they may have a chance at success.

However, as Lexus did initially, they already have some room to improve. Right Foot Down notes that his sister's fully loaded Optima turbo seems impressive for its $40k sticker until you notice the finer details that seem to have been skimped on. The LED tail lights and navigation system, for example, look good until you compare them to a set from Mercedes.

Regardless of whether or not Hyundai takes the plunge and really starts to differentiate models across it's current brands and establishes a new luxury brand, they will still need to work on innovation and quality to set themselves apart from their rivals who have been at this much longer.

Acura's extinction couldn't hurt either....

P.S., special thanks for Bullit417 for letting us hijack part of his post this morning to brainstorm this.