The Hyundai Equus/Genesis Story by John Krafcik
 

http://www.insideline.com/hyundai/eq...nts_sort_form1

The fact that you're reading this on Inside Line means that you're a well-informed automotive enthusiast. Given that status, you've certainly earned the right to have a healthy bit of skepticism about the upcoming launch of our new flagship, the 2011 Hyundai Equus.

With the editorial space that the very gracious Scott Oldham has provided me here, I'll give you some insights into what we're up to with our entire premium rear-wheel-drive product lineup, including Equus. And who knows, maybe you'll have a different point of view about what we're doing at Hyundai when you're done reading this.

Whatever you might decide, let me thank you in advance for your interest in hearing about this chapter of the Hyundai story.

The Genesis of a Premium Model
The story of Equus begins with its platform-mate, the Hyundai Genesis. When I joined Hyundai in early 2004, the company had already begun the planning for this bold product — a rear-wheel-drive, premium sport sedan designed to take on the BMW 5 Series, Lexus GS and Mercedes-Benz E-Class. We ended up spending a much longer than usual amount of time in the product development process with Genesis.

Aren't you just going to re-create what happened with VW and the Phaeton?" The simple answer here is "No."

Why? Well, we had a lot to learn, for one thing. Engineering a premium rear-wheel-drive platform brings a unique set of technical challenges compared to the front-wheel-drive platforms we'd grown quite capable of developing. And the Genesis program included our first homegrown V8 engine, known as Tau.

Yes, Genesis was a big deal internally, and there was an extraordinary focus to ensure we got things right. We had the time we needed and the budget we needed to design and develop a flexible, world-class, rear-wheel-drive platform that would eventually spawn at least three unique products. These were exciting times at our global research and development facilities, and we were extremely focused on delivering products that would wipe clean any preconceptions about what Hyundai was capable of doing.

The Genesis of a Premium Brand
That focus manifested in many ways. One was exterior design. There was a lot of internal debate on design direction for Genesis. We used a European design house as an early consultant, and its proposals informed the core design elements of the first approved exterior model, which got as far as the tooling stage. In our industry, when you've built tools to stamp the exterior sheet metal, you've committed millions of dollars, and so you're pretty much committed at that stage to bring that design to market. But in the end, we weren't happy with the design. So we made the right decision (albeit a difficult and expensive one) to redo the exterior with a cleaner, more athletic and more enduring design, homegrown from our own design studio. And with that decision, Genesis went from looking like this :
http://media.il.edmunds-media.com/hy..._61410_717.jpg


to looking like this :
http://media.il.edmunds-media.com/hy..._61410_717.jpg


At the same time that we were overhauling the exterior design, we were refining driving dynamics, which involved targeting a sportier feel differentiated from the isolated feel of many luxury sedans. We were also working out the retail strategy. Internally, there was debate around three different retail options: launching as we did, with Genesis sitting atop the Hyundai lineup and sold through Hyundai dealerships; creating a separate retail channel like Acura, Infiniti and Lexus; and developing a hybridized approach with a unique Genesis brand sold through Hyundai dealers.

In the end, the decision to launch as we did put primary focus on Genesis, providing a halo for the entire Hyundai brand. We got lucky here as well. With the Great Recession coming just a few months after the Genesis launch, a stand-alone retail channel would have been a difficult financial burden for our dealers to support. New stand-alone dealerships can cost anywhere from $5-$75 million and we avoided those costs for our dealers. And winning the North American Car of the Year award in January 2009 gave us a key communication platform to ensure American car buyers understood that Hyundai could engineer vehicles that compete with the very best.

In our business, many automakers speak of halo products, but it's rare to see a product truly delivering a halo benefit to the brand the way Genesis has done for Hyundai. In fact, last year, out of all the creative marketing approaches we used to help drive our success in a tough year for the industry, no communication message was more effective in improving buyer consideration for the Hyundai brand than the North American Car of the Year award for Genesis.

Market Success for a New Image
Beyond the halo value to the overall Hyundai brand, we've also been pleasantly surprised by the market success of the Genesis itself. It has captured a 6.3 percent retail market share of the mid-luxury market this year, putting it in 4th place in this highly competitive segment, behind only the Lexus ES, Mercedes E-Class and BMW 5 Series. It's ahead of the other 14 entrants in the segment, including the Infiniti M, Lexus GS, Lincoln MKS and Audi A6.

That 6.3 percent retail share is even better than the 4.9 percent share of the retail industry that the overall Hyundai brand is delivering. According to J.D. Power's most recent Initial Quality Survey, had we launched Genesis as its own brand, it would have tied Lexus for the best quality in the industry. Automotive Lease Guide's guidebook for May- June 2010 shows that Genesis has residual values on par with the Mercedes E-Class and better than the Lexus GS, BMW 5 Series, Cadillac CTS and STS, Lincoln MKS and Infiniti M. And the product mix has been incredibly rich, with over half of all Genesis' sold to date going out the door with sticker prices over $40,000. Our V8 engine mix runs around 45 percent — the highest optional V8 engine mix in the segment.

The Genesis Coupe was our first extension of the Genesis platform, and it, too, has been a remarkable success, also exceeding our overall Hyundai brand market share with a 5.1 percent retail share of the domestic-dominated sporty coupe market. Our engineering teams worked magic with this car, and it shows. When Motor Trend gave the Genesis Coupe the win over the new Camaro, Mustang and Challenger in a comparison test, it said it all with the comment, "the only one that felt like a genuine sports car."

What's amazing is how much under-the-skin commonality Genesis Coupe has with the sedan: engine subframe, frame rails, center floor pan, rear axle, 3.8-liter V6, ZF transmission and much more. We invested the savings from this part-sharing into unique sheet metal and a sportier driving character to differentiate the Coupe. This has paid off nicely for us, as Genesis Coupe sales have been highly incremental to the sedan. (Most of our competitors use a conventional coupe-looks-like-sedan approach, which saves money but doesn't deliver substantial differentiation, or, as a consequence, much incremental sales volume.) Further, the messaging synergy between the Genesis Coupe and sedan has been very efficient for us, with marketing communications and media coverage on either car providing opportunities for consumers to discover both of them.

A Halo for the Brand
Taking the product, the brand and the customer experience a step further, some of you may ask a fair question: "So I see Hyundai is happy with Genesis. That's great. But why bother going any further up-market? Aren't you just going to re-create what happened with VW and the Phaeton?"

The simple answer here is "No."

Let me explain the differences between what we're doing, and how we're doing it, compared to VW's approach with its Volkswagen Phaeton.

First of all, with Genesis, we've demonstrated there is a remarkably large group of consumers already comfortable spending over $40,000 for a great car, with great quality and residual value, wearing a Hyundai badge. At the time of the Phaeton launch, VW hadn't had this type of validation from American consumers. We've found that our early Genesis buyers are smart, affluent and self-confident. They don't need the social approval that a traditional premium badge provides to some, and in fact may be turned off by the unique kind of reverse social stigma a premium badge carries in some circles, especially in uncertain economic times like these.

In many ways, Genesis buyers resemble the first group of Lexus owners in the early 1990s. Like those buyers, today's Genesis owners see the extraordinary value their car provides versus the competition, and their discovery of this value by itself is very appealing to them. So now, looking forward, we've got a large group of Genesis owners who are delighted with the car (it won the J.D. Power APEAL award for its segment, and has won two consecutive AutoPacific Vehicle Satisfaction Awards in its segment), and are already comfortable with the idea of a premium Hyundai product. Hundreds of them have already contacted us on their own, inquiring about the new Equus.

Now compare the price walk from the car below Phaeton in the VW lineup, the Passat (average MSRP of under $25,000 back in 2004) to the base Phaeton price of about $65,000, with a fully optioned price of (gasp, what were they thinking?) over $100,000. That was quite a gap to bridge in their sedan lineup. (For you uber-enthusiasts who remember the $40,000 Passat W8, keep in mind that VW sold only 268 of them through the first eight months of 2004, about 0.6 percent of Passat sales during that period, before production was ended.)

At Hyundai, we're looking at an average Genesis MSRP of $40,000 right now, an incredibly well-equipped Equus starting price in the $50s and a fully optioned price less than $10K more. We think that is a much more manageable price walk.

Low Volumes, High Aspirations
A key enabler of success in achieving our objectives with Equus is the simple fact that our sales expectations for the car are modest — just a few thousand per year. So instead of an unrealistic volume objective as a key business driver, we have just two key goals in mind for Equus: show the world we can build a flagship sedan that rivals Lexus LS, BMW 7 Series and Mercedes-Benz S-Class, and in so doing build further confidence in the Hyundai brand with a broad audience of car buyers; and pilot several breakthrough customer experiences for Equus owners that will differentiate us from the luxury pack and enable rich learning opportunities within our Hyundai retail network.

Based on the early feedback from consumers and consultants, we're pretty confident in the car itself. The quality, craftsmanship, NVH, driving experience, feature content...it's all there. Residual values will be strong. When compared to cars at the same price point, there is really no comparison. And in cost-is-no-object comparisons — the kind that have fueled our engineering team during the Equus development process — we know that Equus performs very well. In the end, journalists and consumers will decide this point, but for now, we're confident with the hardware itself.

It's the Equus customer experience where we see significant opportunity to improve upon current industry practice. We've got several initiatives underway here that rewrite some of the established rules of the premium automotive retail and ownership experience.

You may have already heard that we will be providing an iPad to 2011 Equus owners. Why? An interactive color touchscreen tablet computer like the iPad provides a fabulous platform for our owners to navigate all the features of this very technologically complicated vehicle. It is the ultimate owner's manual. Interactive text will mingle with detailed photos and videos to provide rich feature descriptions. We'll also be offering a live service-scheduling functionality from the iPad (or any computer or smartphone) that will allow Equus owners to schedule a service appointment directly with the dealership at their convenience.

But here's the best part. We'll come and pick up the Equus at your home or business and leave behind a service loan car for you to drive while we perform the work. And when we're done, we'll deliver your Equus back to you. That's pretty special, and unique in our industry. We call it Service Valet. With Equus, it's not about putting you at the front of the service line, it's about eliminating the line entirely and demonstrating extraordinary respect for your time. For many smart and affluent buyers, time is the ultimate luxury. Here, our low-volume aspirations enable us to provide this kind of personal touch. Lexus, BMW and Mercedes cannot match this service, as their volumes are simply too high.

A Smarter Customer Experience
Our insight here on the customer experience isn't rocket science, but it is a different take from traditional thinking in our industry. Traditional thinking says that luxury cars need to be sold in large, expensive, dedicated, luxury showrooms, often featuring marble, waterfalls, cappuccino machines and putting greens. Those things are nice, but they don't make up for the basic observation that, except for a few car geeks (like me, and perhaps many of you reading this), no one really wants to go to a car dealership. We've all got better things to do with our time. If I want a coffee, I'll get it from Starbucks or Caribou, not the local Lexus dealer. And if I were a golfer, I wouldn't choose to get my putting practice in at the BMW dealership. Sure, those things are nice if I have to go to the dealership to get my car serviced. But wouldn't it be better if I didn't have to make that trip at all?

Many of these old-school luxury-brand dealerships were built just a few years ago, and many of them cost their owners $25-$75 million to construct. (We have a nickname for facilities like these in our industry: mausoleums. That's fitting, isn't it?) But we've found that many affluent consumers, particularly the smarter ones that have been most adept at building and maintaining their wealth, fully understand that they're paying directly for that luxurious overhead. And since you can't take your fair share of the marble in the showroom and stick it in the trunk of your Lexus, there is very little tangible value there considering the short periods of time you'd spend in the dealership.

Most affluent buyers understand this, and our Equus target buyer really gets it. They're the kind of person who may shop often at Costco (where the average household income is over $110,000), while enjoying overseas vacations with their families each year. For these buyers, intent on quality experiences, confident in their own skin and hesitant to pay a premium for the superficial patina of a luxury showroom, our focus with Equus on an outstanding product delivered to them on their terms will provide an intriguing alternative for them.

Premium Means Consumer-Friendly
So how will we get these types of buyers into an Equus? One exclusive and unique approach we are taking is to extend the Service Valet concept to product demonstrations and test-drives. Consumers who are interested in Equus will have the opportunity to make a reservation for a product demo and test-drive. Some consumers may wish to do this at the dealership, while others may decide they'd prefer a demonstration car be brought to their home or business — a personal demonstration. Our dealers will work with our customers to determine their level of interest and arrange the demonstration that works best for them. Here again, our low volume enables this kind of personal touch, providing a convenience that traditional high-volume luxury brands cannot match.

While all Hyundai dealers will have the opportunity to sell Equus, qualification criteria will result in perhaps 200-300 dealers onboard over the next year, meaning a typical dealer may sell 10 examples of the Equus or so per year. That will provide our dealers with the time necessary to provide the personal care that will differentiate the Equus sales and ownership experience from the traditional luxury-brand experience. These dealers are now making plans to construct their "showroom-in-a-showroom" displays that will house Equus and Genesis products. The showroom feel is efficient, technical, and definitely not over the top. Each dealership will have a dedicated Premium Vehicle Champion, with only qualified sales consultants to present and sell Equus and Genesis products.

We're still several months from the retail launch of the 2011 Hyundai Equus. Within our company and our retail network, we're hard at work putting the finishing touches on the Equus, and our new set of premium services. It's an exciting time and a terrific symbol of how far we've taken the Hyundai brand these last few years...and how much farther we think we can go. Thanks for listening to the story. Be sure to watch us, and feel free to send us your thoughts via the team at Inside Line.

didn't know v8 sales were 45%. i think hyundai will find 2000 buyers.


Equus and S side by side. i like hood ornaments more..

http://jc-dc.net/clients/misc/equus/equus.png
http://jc-dc.net/clients/misc/equus/equus2.png

Nice.

Cool.

Looks nice.

this really doesn't need its own thread

Interesting story. Thanks for posting.

Though I do disagree with Hyundai comparing their sales and market share to the true sport luxury sedans.

I have a feeling we'll be hearing from someone in this thread soon....

That was a great read. Go Hyundai. Acura Take note!

Sweet....good story, for sure!

Guess you're the only one. :shrug:

Great story! I didn't realize the Genesis Coupe shared that much with the sedan and only further reinforces my belief that Hyundai is the smartest car company in America.

if they didn't change the design it would've been a disaster. people would've made fun of that horrendous grill. this is a great example on how a simple tweak in design saves a product. are you listening, acura?

i know some people don't like the klingon grill, but at least it's not a design abomination like their first prototype.
http://media.il.edmunds-media.com/hy...610101_717.jpg

i know this is just a PR and marketing attempt, but it's kinda refreshing to hear from the CEO's own words. I like this strategy.

Don't even go there! :annoyed:

That wasn't much of a "genesis" story, too much marketing, not enough backstory. But whatever, they were very smart to copy Mercedes and Lexus and Acura when switching over from that godawful prototype front fascia.

anonymous grille works for now. i dont think hyundais lineup is solidified enough to start stamping out fascias. at least they are acknowledging this.

current strategy seems to be: let each car grow within its segment and gain a true brand recognition before moving forward. in terms the equus, it is still in the process of emerging. the last thing they need to do is tarnish their image by having consumers associate the new high-end with the previous low-ends. the "what's that car!?" is working best for them at the moment.

You have to take what he says with a grain of salt. Of course he's going to put a positive spin on everything Hyundai has done so far. I still think the Genesis and Equus really need their own brand and seperate dealers. No matter how he tries to justify it, most Hyundai dealers are far below the standards set by all of the major luxury players. It may just be me, but I actually look forward to going to my Lexus dealer for service....

:agree:

They may be pricing the Equus intelligently but they probably will need to either step up their dealerships or split the brand into something higher end. It sounds like now isn't the best time, but eventually it needs to happen if they want to continue to progress.

That said, it was quite an interesting read. I like what Hyundai has done in the last decade or so. Quite interesting to see what a V8 option, RWD, attractive styling and an attractive price point can do :whistle:

That's great how they shared so many components and yet the cars are distinctly different. If I didn't know any better and they had different names, if you told me the sedan and coupe were quite similar I'd laugh in your face.

It would appear that we have similar viewpoints.

While this strategy works for Hyundai now, it won't work forever, at least not likely. Right now the "what's that car?!" is what they need, as someone else said. Eventually they need a real brand strategy.

I say this because I think the CEO is talking around the point: Buying a luxury car is NOT just for the car; it's for the experience, and not just the buying process.

I'm not saying Hyundai can't do all of this within one dealership building. There are luxury brands with unrelated mainstream brands under one roof all over the country. But they need to be separated by more than This Room and That Room. They still need a new BRAND, not just area in the show room. For a premium brand they're going to need a couple of crossovers and probably a coupe or two with convertible versions (the Genesis Coupe is obviously not in this league). And that's just the tip of the iceberg.

But again, this isn't necessary for Hyundai to do RIGHT NOW. Whilst the Great Recession continues its grip, people step down from their German or Japanese luxury into a better value Korean luxury product and will be impressed. When the economy comes back they'll be all the more willing to buy a luxury Korean with a primo badge on the decklid. Simple as that.

how many people who complain about hyundai service have actually been to a hyundai dealer? Our hyundai dealer is exceptional, i cant really see the difference between them and the acura dealership (except the acura dealer gives me free chips and cookies)

^ +1

I'd say they're about equal....in some cases the Hyundai dealer is much more likely to do stuff for free. :biggrin:

Thank god they didnt go with that first design. Hyundai wouldve been fucked.

There's a difference when you go to, say, a Lexus or MB dealership. Complaints about a dealer are almost on a case-by-case basis, so that just depends on the individual dealer. From what I've seen, Acura dealerships aren't much different from Honda dealerships, aside from the cars in the showroom and in the lot. I know from experience that a Toyota dealership is pretty different from a Lexus dealership. There is one Toyota dealership that has a free* barbeque truck though, which is actually pretty damn good though aside from that there's a big difference

One Lexus dealership my sister went to had a salon so the she could get her hair/nails done. Another dealership had its own Starbucks. And the one we bought her ES350 from had a fridge stocked with cold bottled water, Vitamin Water, bottled Starbucks, Gatorade, and some other items for FREE out in their lounge and they also had 40"+ flatscreens everywhere you looked, and an elevator to get to their upper offices. I've never seen that in any non-luxury dealerships.... hell, I haven't seen that in any Acura dealerships yet either.

Yeah, it may be no big deal but it does make a difference when you're spending $40k, 50k, or maybe even 60k or more on a car. This may become a reality in the near future when you look at what Hyundai has in the pipeline.

I think one universal thing among everyone is that they don't like to sit on their ass doing nothing while their car is being fixed. Who doesn't like to feel important or that they're being taken care of? I can imagine those things are even more significant when it comes to the typical clientele of Lexus, MB, BMW and Audi.



*bbq ticket comes free when getting maintenance

:shrug: I guess so. it's a great read, but it's not news...

^ :werd:

That's why it's in Car Talk now...

Good read.

I saw plenty of Equus' while i was in Korea in April. They are gorgeous cars.

lol, you know you are paying for those right?

what did acura,lexus and infinit do in the beginning? Did they sell of their honda, toyota, infinity stores first or did they give them their own new dealerships right out of the box?

I've been to one Hyundai dealership and I can confidently say that they fucking suck at customer service.

That experience alone convinced me not to visit any other dealership. :2cents:

good question i've always wondered this

rear was weird too.
http://www.blogcdn.com/www.autoblog....an-mule002.jpg
http://www.blogcdn.com/www.autoblog....an-mule005.jpg

well it all depends. my local hyundai dealer is great. it's hyundai VW dealer and they have free pop corn, coffee, chips and pops. all nice friendly folks.

:agree: The wife and I sat in the Equus at the 2010 NYIAS. We were definitely impressed as it seems to be the real deal.

As for the reference to service treatment, this statement is SPOT ON :thumbsup: :

In bringing my 09 MDX in for service @ my Acura dealership, my experience was NO different than when I had my 07 Accord V6 serviced at Honda.....except that the cars in the showroom were a little nicer. The operation was efficient but not what I'd expect from an upscale brand.

Honestly, if Hyundai is as thoughtful in the development of their dealerships as they are with their product lineup, good things should come soon when it comes to the service experience.

For my next used car in five+ years, I will definately take a look at the V8 Genesis.

Good thing about SoCal is that you see cars on the road well before their release date (sometimes in full camo, sometimes none at all). On the 57fwy this past Saturday, we saw an Equus with manufacturer plates (obviously no camo). It didn't seem that much bigger than a Genesis, but it certainly fit in with the various luxury cars driving around it.

I was a skeptic at first, but Hyundai seems to know what it's doing...

Just as a personal commentary, I like what Hyundai has executed in combining upscale luxury and quality (apparent anyway) with terrific value.

While I personally dont believe they'll make many customers of current Lexus, BMW and MB stalwarts, they may pull more than a few buyers from Acura and Infiniti and will definitely be close to the top of the list for those looking to make the upscale move from Honda or Nissan, as well as lower Hyundais.

All that said, the question to me is: for similar money, would the buying public opt for a well equipped new Genesis 3.8 sedan OR say a CPO 09 Acura RL (ugly though it may be). And this is question that I've pondered on a personal level NOT something to cast any aspersions on Hyundai's plans.

I'd buy the Genesis. I just don't like the RL.

im not paying for shit. all i do is pick up fluids (Which i haggle down to less than retail)

but one could say the same thing about other dealers. im sure the customer ends up paying for the 40 inch plasmas and blowjob machines at their lexus dealers. i think hyundai is killing the competition with the in-home service pick up idea. now THAT is luxury

not all dealers are the same, but ive been to 3 hyundai dealerships soo....i win

I would get the RL. Reasons are, SH-AWD (especially), exterior look (that I don't mind) that aren't (as) derivative, and that interior, and it's made in Japan. The fact that the Genesis isn't offered with optional AWD automatically takes it out of the running.