Korean auto giant bets on Chinese market

Hyundai Motor plans to launch its first luxury car under the Genesis brand in China in the next two to three years.

According to Reuters, Genesis car brand CEO Manfred Fitzgerald said the company is considering producing these models in China. "That's for sure. However, there are many car companies that survive in this market even though they only import cars to sell," Mr. Fitzgerald was referring to Toyota Motor's luxury car brand Lexus.

Hyundai's development plan is ambitious in helping the company escape 10 consecutive quarters of net losses, partly due to poor sales of its cars in China.

The launch of Genesis in a key market like China marks a new step for an automaker that has traditionally focused on making cars for the masses. However, the company still lacks the prestige and tradition of making luxury cars like the German trio of BMW, Mercedes-Benz and Audi, which dominate the global luxury segment, including in China.

Hyundai is betting on the Chinese market with luxury cars and an American CEO.

“The wealthy Chinese customer base is very concerned about brand value,” said Fitzgerald, an American who used to run Audi’s Lamborghini brand. He shared this information at Genesis’s only store in Korea in the Hanam district on the outskirts of Seoul. A Genesis G80 sedan here sells for 75 million won (about $67,100).

“If you don’t position your brand value from the beginning, even if you have the best product in the world, no one will buy it,” Fitzgerald concluded, declining to share information about Genesis’ sales plans, even though the brand launched in Korea in late 2015 and in the US in August 2016.

Car import tariffs in China are 20%. This puts pressure on domestic production on automakers here.

Genesis plans to open more standalone stores globally and is scouting locations for its first U.S. store. The brand currently has just two models and will expand to six by 2020.

Choosing the right distribution channel is just as important as product quality, says consultant Eric Noble of California-based consulting firm CarLab.

Today, 300 of Hyundai’s 800 U.S. stores sell Genesis models alongside other low-cost Hyundais, while rival Lexus has showrooms dedicated to the brand.

"In terms of product quality, the Genesis brand is really impressive. However, in terms of distribution, there are many things the company has to reconsider if it wants to sell cars in the North American market," Eric Noble shared.

Hyundai Motor Group Chairman Chung Mong-koo, 78, took the helm of Hyundai and Kia Motors in the 2000s and turned the two brands into the world's fifth-largest automaker, focusing on small, low-cost but good-quality cars.

Now, Chung Eui-sun, Chung Mong-koo’s son and vice chairman, has ambitions to elevate the Hyundai brand. He was the one who decided to split Genesis from Hyundai and create a new independent brand. His ambition is to penetrate the luxury car market, breaking away from the now saturated mass-market market to achieve higher profit margins.

Fitzgerald said the decision to join Genesis was a “huge” one for a company that has traditionally not hired from outside. “I know the road ahead will be long and difficult, but we are determined to achieve our goals,” he said.

According to VNE