Is the Genesis a new beginning for Hyundai?

Roland Jones Associate editor • Profile • E-mail

The appearance of Chinese automakers at this year’s Detroit auto show sparked a new round of gossip and speculation over when companies such as Changfeng and Geely will start selling budget-priced cars in the coveted U.S. market. But perhaps analysts and executives should have focused on a more immediate competitive threat — South Korean automakers.

The odds are slim that any Chinese manufacturers will begin selling cars in the United States before 2009 at the soonest. But Hyundai, the world’s sixth-largest automaker, has been marketing cars here for two decades, and it once again impressed pundits at the show with its latest offerings.

Mark Rechtin of trade publication Automotive News referred to the “scary-good Koreans” at the show and singled out the Hyundai Genesis, a new rear-wheel-drive, full-size luxury sedan due to go on sale this year.

“Can someone explain to me how an engineer chained to his desk in Ulsan can create a better Buick than a team of guys in Detroit?” Rechtin wrote. “The Hyundai Genesis’ performance and interior quality could turn the near-luxury sedan segment on its ear. If dealers can convince Americans to shell out 35 grand for a rear-drive V-8 Hyundai with leather everything, look out. Same goes for the Kia Borrego and the full-sized SUV segment.”

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The success of Toyota, Honda and Nissan in recent years is well-known, but it’s not just Japan’s automakers taking the U.S. market by storm. Hyundai and Kia also have made significant inroads, with Hyundai enjoying record sales of the Sonata sedan it builds at its plant in Montgomery, Ala.

Now, after years of toiling in the shadow of Japan’s heavyweights, it looks as though Hyundai is trying to “do a Toyota,” shrugging off its image in the United States as a budget producer and looking to move into the more profitable luxury car segment.

The Genesis looks like the first step in that strategy, taking aim at models from Lexus, Cadillac, Infiniti, Mercedes-Benz and BMW, which it likely will undercut on price.

“This looks like a very good product, but my question is, will you really buy a Hyundai if you’re looking for a luxury vehicle?” said Jack Nerad, executive market analyst for Kelley Blue Book, which tracks the automotive industry.

“But I don’t want to underestimate Hyundai,” he added. “Similar things could have been said about brands like Infiniti and Acura 20 years ago, and back then the line was, who would believe a luxury car from the Japanese? People underestimated their ability to play in the segment.”

The difference between Hyundai and Toyota, Nissan and Honda is that each of the latter three started a new sales channel (Lexus, Infiniti and Acura) to cater to the luxury buyer, Nerad said.

“To spin imagery around luxury — that would have been a stretch for the Toyota, Honda and Nissan brands, and I think it’s also going to be a stretch for the Hyundai brand,” he said. “You can only stretch a brand so far in terms of what it means to people. It may say good value, but that doesn’t mean that’s a priority when you move into the luxury end of the spectrum.”

With U.S. auto sales expected to be stagnant this year and the economy struggling, Hyundai faces a difficult road.

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