Hyundai moving upscale to Luxury Brand

[hemidakota]

I have been watching the Koreans moving up the QC scales fo rthe last three years and totoally amazed. An now this.......will the Koreans ouster the Japanese on QC?

Steve

----------------------------------------------------------------------------------------------------------------------------------
08:41 July 26, 2004)
Hyundai wants a luxury brand; automaker seeks U.S. debut by 2007

Hyundai says it hasn't decided whether to sell the Equus in the United States.

By PETER CHANGE AND MARK RECHTIN
Automotive News SEOUL -- Hyundai Motor Co. aims to set up a luxury sales channel in the United States as early as 2007.

South Korea's upwardly mobile carmaker is developing a luxury sedan in a plan to mimic Toyota's Lexus and Nissan's Infiniti offshoots.

"Basically, our plan is to launch a brand that is strong enough to compete with BMW and Audi and Lexus," says a senior executive in South Korea. He says Hyundai wants to establish the channel in the United States "in three or four years."

Hyundai's quality has improved, and its U.S. sales are rising. Sources at Hyundai Motor America say parent company executives believe the time is right for a prestige brand.

"It's more a question of when, not if," says a Hyundai Motor America official who asked not to be identified. "Hyundai's next generation of Korean-market luxury cars is arriving in 2007. They don't want to wait for the generation after that to launch a luxury brand in America."

Hyundai engineers are tearing apart BMW and Mercedes models to better understand European luxury cars, according to the U.S. insider.

"We are now developing a 3.5-liter rear-wheel-drive luxury sedan that will be offered with the luxury brand in the U.S.," says a Hyundai source in South Korea. "The development is in an initial stage in the Namyang r&d center. We hope it will greatly enhance Hyundai's brand image in the U.S. market."

He says the sedan will fill the gap between the rwd, V-8-powered Equus sedan, which is sold in Korea and Europe, and the XG350, which tops Hyundai's range in the United States. The new model will be sold in the United States and Europe through a Lexus-like channel. But it will not be the only model in the luxury lineup.

A high-line sales channel long has been an element of Hyundai's U.S. expansion plans. Now Korean executives think it is time to act. Sales have been growing, and Hyundai's brand image got a big boost from a strong showing in the J.D. Power and Associates Initial Quality Study in April.

Another Hyundai Motor America official - who declined to be named - was cautious about the time frame. He called a 2007 launch "optimistic" and said it could occur as much as two years later. He says Hyundai Chairman Chung Mong-Koo is aware the main brand still needs time to build credibility in the United States.

"But there's only so far we can go with the Hyundai brand," the official says. "To be a full-service car company that wants to be in the global top five or six automakers, we have to go upmarket. There's money to be made there. It's just that there's a ceiling for how much someone will pay."

Although South Korean executives have mulled the idea for a long time, Hyundai officials in the United States have been reluctant.

"Hyundai Motor America has been able to forestall it until now, but the Americans will probably get a luxury brand before we're really ready for it," according to a U.S. source.

But he adds: "The Koreans are not fools. They know the financial challenge and marketing challenge of launching a luxury brand here."

The luxury brand likely would have to have at least three vehicles at the outset, the source says. The lineup also might include the 2007 redesign of the 4.5-liter Equus.

Because it is equipped much in the Korean style, the current Equus is not considered ready for the global luxury wars. Engineers are trying to make it more like a BMW or Mercedes.

"Hyundai is trying to make a global luxury vehicle, not the typical Asian luxury boat," a Hyundai U.S. executive says. He says the Equus was delayed from 2005 until 2007 because it was "too Korean."

A Hyundai executive in Korea says Hyundai hasn't decided whether to sell Equus in the United States alongside the new 3.5-liter sedan.

Some U.S. dealers are wary of Hyundai's quest. Don Hicks, who owns Hyundai, Kia, Subaru and Suzuki franchises in the Denver area says it is hard for a luxury brand to take hold.

"A lot of Acura guys came and went in the first wave," Hicks says. "Denver has been able to sustain just one Infiniti store. So we need to learn from history. A standalone facility for a Hyundai luxury car might be a stretch, even though Hyundai has made great strides and gotten great press.

"I'd rather they concentrate their efforts on giving all Hyundai dealers a truck," he says. "I think we could sell more trucks than luxury Hyundais."