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Hyundai Details Plan to Separate Luxury Names at Dealerships

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Hyundai Details Plan to Separate Luxury Names at Dealerships

By James M. Amend

WardsAuto.com, Dec 30, 2009 1:08 PM

Hyundai Motor America wants its U.S. dealers to create a special “showroom-within-a-showroom” atmosphere for showcasing the South Korean auto maker’s Genesis and upcoming Equus luxury lines.

According to a memo obtained by Ward’s, Dave Zuchowski, HMA vice president-national sales, tells dealers this morning the move is in keeping with Hyundai’s “aggressive product cadence.”

Hyundai has launched two premium vehicles into the U.S. market over the past two years – the Genesis sedan and coupe. It will bring its Equus sedan stateside in fall 2010.

While the Genesis represents a value-oriented competitor to vehicles such as the Mercedes-Benz E-Class and BMW 5-Series, the larger and pricier Equus will take on top-of-the-market nameplates such as the Mercedes S-Class, BMW 7-Series and Lexus LS.

Having dealers section off their showrooms for Genesis and Equus models would represent a lower-cost alternative to setting up an entirely separate retail channel, as Toyota Motor Corp. did with Lexus.

“That’s a good way to go,” HMA CEO John Krafcik told Ward’s at the New York Auto Show this year. “That way, dealers don’t have to spend $5 million, $10 million on a new luxury brand. Sectioning off the brand, that’s the Holy Grail.”

But HMA may feel some push-back from dealers, as most still are smarting from the worst new-vehicle sales downturn in decades. While Ward’s data shows Hyundai’s U.S. sales through November were up 6.2% vs. an industry downturn of 23.8%, a majority of the auto maker’s dealers sell vehicles from multiple manufacturers.

And unlike the Genesis, the Equus will find the value card tougher to play in such a premium segment. Pricing has not been released, but it could reach $96,000 in some regions of the world.

Hyundai wants separate Equus, Genesis area at dealerships.

One dealer contacted by Ward’s expresses reservations over the plan’s timing, saying some regions of the country are further behind in the economic recovery than others.

The dealer estimates his cost of creating a showroom-within-a-showroom would be in the “hundreds of thousands of dollars.”

Describing his vision in New York, Krafcik pointed to the way Toyota Motor Sales USA Inc. co-locates its youth-oriented Scion brand in Toyota dealerships. Zuchowski draws the same parallel in his letter to dealers.

“Similar to the attributes of Toyota-Scion buildings, this strategy will create physical and psychological separation in the Hyundai showroom environment,” Zuchowski writes in his memo.

“This ‘showroom-within-a-showroom’ concept will have consistent branding elements and is being designed to accommodate a myriad of Hyundai showroom shapes and sizes.

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“It will be scalable and modular to support all potential showroom configurations with a coherent look and feel,” he adds. “One or more Hyundai premium products will be displayed in and around this premium display area.”

Zuchowski says a new interior “Corporate Identity Kit” will be made available “to complement the entire Hyundai showroom and upgrade the overall Hyundai dealership appearance and experience.”

During next year’s Equus launch, Zuchowski says HMA will work closely with dealers “to elevate the sales and service experience of our owners.” Expect adding valet and concierge services, as well as more stringent training and certification requirements.

Among the investments dealers must make are the purchase of a “Premium Showroom Kit,” an “Equus Initial Parts Kit,” and an “Equus Special Service Tool Kit.” Dealers also must provide additional floorplan capacity and attend a product-immersion program in South Korea.

“We intend to use the launch of the new Equus to develop and further establish Hyundai as a legitimate force in the premium-luxury segments,” Zuchowski says.

“With this blended strategy, we can effectively avoid the substantial investment involved in establishing a separate luxury channel, while still providing an enhanced dealership environment with an upgraded ownership experience that will deliver a substantial incremental profit opportunity with a very reasonable dealer investment.”

HMA could not provide comment on the strategy prior to deadline.



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