Fountain Valley-based Hyundai Motor America is considering expanding its push into luxury cars by launching a new, separate brand.
The automaker, long known for affordable cars, has looked at taking a page from Japanese automakers Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., which launched separate luxury brands with their own dealerships in the 1980s.
But that would require a lot of spending by Hyundai and dealers to start new showrooms.
?f we had gone down the path of standalone dealerships in an economy like this one, it would have been very difficult for us and our dealer partners with the huge capital investments (that) are required,?said John Krafcik, acting chief executive at Hyundai Motor America, part of South Korea? Hyundai Motor Co.
Instead, Hyundai could be leaning toward a ?rand within a brand?strategy?imilar to Toyota? Scion or BMW AG? Mini?here existing dealers carve out space for a new luxury line.
A third option would be to stick with Hyundai? current strategy of selling luxury cars under its own brand with no big changes for dealers.
?here are a couple options that we have in front of us to consider,?Krafcik said. ?ome are better than others.?
In August, Hyundai came out with its Genesis sedan, designed to compete with BMW, Toyota? Lexus and Mercedes-Benz. It followed up with a Genesis coupe in February.
The luxury cars are sold as Hyundais by the automaker? dealers.
The challenge for Hyundai is to get car buyers thinking about it as a maker of luxury vehicles.
The automaker has held up better than others in the downturn with affordable vehicles and an assurance program that allows buyers to return their Hyundais if they lose their jobs.
Others since have copied Hyundai? return policy.
But luxury buyers likely aren? worried about price or whether they?l be able to hold on to a car. Creating a second brand could be the best way to appeal to them.
The automaker sold 6,021 Genesis sedans this year through April. The Genesis has about 7% of the market for the mid-luxury segment, which includes the Lexus GS and BMW 5 series.
Much of Hyundai? overall strategy has been modeled on those of Toyota and other Japanese automakers, which got their starts here as sellers of economy cars before evolving.
In 1986, Honda launched its Acura luxury brand. Toyota followed three years later with Lexus, as did Nissan with Infiniti.
?hree of the Japanese brands have gone ahead and done?separate luxury brands, Krafcik said. ?ven Mazda was close to doing it.?
Hyundai has approached dealers about the possibility of a creating a separate brand with its own dealerships, according to Krafcik.
?ur most important stakeholder is our current dealer body because you want to make sure whichever way you go that they are aligned behind you,?he said.
Dealers are interested in the brand within a brand strategy, according to Krafcik.
? could see us putting a Genesis brand within a Hyundai store,?he said.
Hyundai hasn? decided on a name for a second brand.
The automaker? showing at the New York International Auto Show in April fueled spec-ulation about Hyundai? plans for luxury
vehicles.
It showed off its parent company? newest luxury flagship, the Equus, a car that could rival the likes of the Mercedes-Benz S-Class, Lexus LS or BMW 7 Series.
The Equus uses the same 4.6-liter, 375-horsepower V-8 engine as the Genesis sedan but with ultra luxury features including a rear-seat power leg rest and seat massager. The car could sell for $60,000 or more, versus about $35,000 for the Genesis sedan.
Hyundai hasn? decided if it is going to start selling the Equus here, Krafcik said.
The automaker plans to ship 100 Equus luxury sedans to dealers here to quietly gauge what Americans think about the model this summer.
?e are in the midst of a market study right now to see if that could fit alongside Genesis in our current dealerships,?Krafcik said.
Krafcik took the reins of Hyundai Motor America in November as acting chief executive. He could be named to the permanent post.
He replaced Jong Eun Kim, who returned to South Korea after about a year in Fountain Valley.
Krafcik joined Hyundai four years ago. Before, he was vice president of product development and strategic planning for Hyundai Motor America. Before that, he worked at Ford Motor Co.
He takes the helm at a critical time.
With all the negative news about American automakers, Hyundai has seen sales hold up better than others. The automaker reported sales of 33,952 vehicles in April, down 14% from a year earlier but better than the industry? 34% decline.
Hyundai? smaller sales drop has allowed it to boost its U.S. market share to 4.1% from 3.1% a year ago.
?e?e the No. 7 automaker in the U.S. at the moment,?Krafcik said.
Besides the luxury push, Krafcik and his executive team have been engaged in a new marketing strategy for the automaker.
?hen people think Hyundai, rarely do they think ?un to drive?and that has been one of the things I?e been trying to inject more into the brand,?he said.
There has even been talk about the automaker launching a two-seat roadster.
?e are trying to compress in a relatively short period of time what some other Asian brands have taken the better part of century to do,?Krafcik said.
