Hyundai's Big Adventure is Named Genesis

The conventional wisdom says:

"Honda has made a mistake, playing it safe
by not building a new V8 powered rear drive platform
for its upscale Acura division.
Acuras are too small, and too close to Hondas,
for the US luxury market.
New entries in the luxury class must have
rear wheel drive and big V8 power to compete,
Luxury car buyers don't care about fuel costs."

It looks like Hyundai has taken the conventional wisdom to heart, and are planning a new luxury division. The first new rear drive V8 car, named Genesis, is nearing production status.

The Genesis cars are beginning full-scale production, and will arrive in US Hyundai showrooms in the first-half of 2008.

The Koreans, who employ a two tiered pricing strategy, will use high prices in their monopolized home market to undersell US competition. Hyundai can price the American version of Genesis very competitively, in the low thirties base.

The big sedan could top out under forty thousand. A coupe version will follow later in 2009.

The V8 powered version has 375 horsepower and a six-speed automatic transmission. Hyundai's Lambda 3.3-liter and 3.8-liter V6 engines will also be available.

This ambitious new strategy, assuming perfect execution, could leap-frog Hyundai into the upper tier of global brands.

The company makes no secret that it thinks itself ready to go after BMW, Mercedes, and Lexus. I don't agree.

And the new winged badge, for the less sophisticated Korean and Chinese markets only, is a shameless knock-off of the Bentley emblem.

Hey, no harm in aiming high, right?

And yes, the early Lexus did imitate Mercedes looks.

Hyundai's existing dealership network is not ready to compete with luxury marque dealers, especially in after-sale service.

But Lincoln is vulnerable, Jag for sale, Infiniti riding narrow success with the G-series, and Buick has just one strong model.

This also has to be considered a real threat at Honda/Acura. But the success of Hyundai's plan depends on low oil prices for the foreseeable future. Hyundais lag in critical fuel economy.

Will people trade down from bigger gas guzzlers to V8 Hyundais with gas prices so volatile?

I think Honda/Acura will be ready as the inevitable American downsizing continues.

The wreckage of the summer of '06, with Chrysler's truck-frame based models crashing on the rocks of $3 gas, must finally be evident to auto execs worldwide.

So Hyundai, while putting their research, development, and marketing money into this plan, must be cautious. With the problems in Korea, this project has been delayed since 2005.

Risky Business

Hyundai has avoided the risk of launching a new brand outright, keeping the new model under the existing Hyundai brand.

What will happen to the slow selling existing flagship model, Azera, as Genesis crowds it from above?

Modest marketing money behind Azera suggests it may be superseded. But doesn't this reinforce the high depreciation image the company has struggled to improve?

And what about Sonata, with the restyled Accord and all new Chevy Malibu running strong in the mid sized sedan market?

For me, the brand's image problem is not far enough behind it to risk the farm on this strategy. Look what happened when Ford and Volkswagen tried to upscale.

Overly ambitious plans also hurt Mercedes-Benz, GM, and Nissan.

In my humble opinion, Honda is the smart money here.

Hyundai should outgrow the Japanese-occupation inferiority complex and focus on what is wrong with their existing product line, namely poor fuel economy.

Toyota Avalon owners report as high as 34 mpg highway with conservative driving. Azeras do a significant 8 mpg less. How will a V8 help this?

The obvious knock-off styling of the new Genesis, to my eye, still falls behind the Japanese and European competition.

Hyundai, mired in domestic scandal and expanding from a narrow platform of quality perception, should have focused on the base, not top of the pyramid.