SEOUL -- Much at Genesis, Hyundai Motor Co.'s new luxury brand, remains a work in progress, even though the first nameplate went on sale in South Korea on Dec. 18 and will make its U.S. debut in Detroit next week.
It's clear, though, that Hyundai wants Genesis to carve a different path from other premium brands. "We had to come up with our own way, our own unique business model," Cho Won-hong, Hyundai's executive vice president of global marketing, told Automotive News at the carmaker's headquarters here.
During a daylong immersion into Genesis last month, Automotive News had access to the brand's vehicles and spoke with top executives about its strategy.
Hyundai executives believe the automaker has built a reputation for quality that will carry over to Genesis, which will distinguish itself from the Hyundai brand with a focus on safety, while avoiding technology for technology's sake. Genesis' rear-wheel-drive cars initially will be sold in Hyundai dealerships -- that may change later -- but Genesis shoppers will be targeted with a separate customer-care approach.
Here are some of the insights gained into what Hyundai wants Genesis to be, how the carmaker plans to make that happen and what it means for the Hyundai brand. The brand goes on sale in the U.S. in late 2016.
> Brand separation. After 15 years of pondering whether to spin off a premium brand from the mass-market Hyundai marque, Hyundai Motor Co. Chairman Chung Mong-koo greenlighted Genesis in the first half of last year, with the understanding that Genesis vehicles will be sold in Hyundai stores -- for now.
That may not last. After the first six nameplates debut by 2020, executives will re-evaluate whether Genesis needs its own channel, Cho said.
The company knows that launching a separate sales channel is expensive, but cost isn't the only issue. The revolution in digital marketing and sales has clouded the outlook.
"Given the big trend in digital technologies, I'm not sure the physical showroom is still a requirement," Cho said. While that suggests some kind of online retailing, he said all decisions would be carefully aligned with the dealer body.
When the company began debating the pros and cons of a separate network, nobody could have foreseen all the aspects of digital retailing that dealerships grapple with today. The delay may allow Genesis to incorporate a digital strategy early on, if not from the start.
> People. Part of separating from the Hyundai brand means having dedicated personnel. Genesis is gradually building its team.
At the time of Automotive News' mid-December visit to Seoul, the brand lacked a dedicated top executive.
Starting this month, though, Manfred Fitzgerald, 52, former director of brand and design at Lamborghini, will set and execute strategies for Genesis as a senior vice president at Hyundai.
He reports to Cho. Fitzgerald joins Luc Donckerwolke, formerly of Bentley, who will lead the brand's Prestige Design Division as head of the Hyundai Motor Design Center.
> Implications for Hyundai brand. As the Genesis lineup expands, the Hyundai Equus, Genesis and Genesis Coupe will go away, and the Hyundai brand will top out with the Azera, executives said. But they insist the Hyundai brand will benefit from Genesis.
By 2020, the expanded Genesis line will have higher sales.
That means more high-margin vehicles into which the carmaker can deploy advanced technologies and spread costs.
That will speed the migration of those technologies to Hyundai vehicles such as the Sonata sedan. Genesis also will provide a halo for Hyundai, Cho said.
"We saw some discrepancy between what we want to be and the real perception consumers have in the market," Cho said. "We believe Genesis will push it forward."
"Having a separate brand improves the expectations," said Kim Sang-dae, director of domestic marketing at Hyundai Motor.
But the sibling relations can cut both ways.
"Disassociating from Hyundai will also be a huge challenge, as very few consumers see Hyundai as a luxurious brand," said Akshay Anand, an analyst for Kelley Blue Book. "Brand perceptions take a long time to shift, and a luxury brand has to compete against brands that are entrenched in the consumer mindset in terms of prestige, comfort, safety, value."
> Technology and cost. Hyundai executives are aware of the change in perception they are seeking.
"We know ourselves. Our brand cannot be recognized as premium by the customers. We cannot charge that kind of premium," said Yang Woong-chul, Hyundai Motor Group's vice chairman in charge of r&d. "It's about premium performance, not premium cost."
That means devoting limited resources to advanced technologies with utilitarian impact instead of flashy, if gimmicky, features.
"Competitors like to put in new stuff as a world's first, whether the customers really like it or not," Yang said. "It's very easy to add very expensive components, but it adds cost. We are focused on engineering innovation."
Genesis could have used a pricey air-spring suspension to deliver an adjustable ride, Cho said. Instead, engineers found a less costly way to provide the same feel electronically.
