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Customer LoginsGenesis luxury brand sets out strategy as it launches in US
New luxury brand Genesis is being launched in the US market and is only the second new luxury brand since 2000. The brand says its strategy and mission is to focus on blending the right product with the right customer experience to deliver a modern interpretation of luxury vehicles.
- Significance:Genesis, the latest all-new automotive luxury brand, is being launched in the United States. A division of Hyundai, the global brand is only the second luxury brand to be launched in the US since 2000. Genesis aims to blend the right product and the right experiences to create its version of modern luxury.
- Implications:Hyundai has been laying the groundwork for a play in the luxury space in the US for seven years, since the introduction of the first Genesis sedan and the addition of the Equus sedan. Hyundai has given its new luxury brand strong global and regional leadership teams, particularly recruiting leadership talent from luxury and high-end automotive global brands.
- Outlook:Genesis has a strong plan and has been given significant, long-term product development and management resources. Genesis needs strong execution and patience to weather the mistakes and resulting adjustments that will inevitably need to be made. It will also need the ability to deliver consistently over several product generations − products that will need to continue to improve in execution and hit the mark with consumers, as well as an SUV or two. While those products are coming, the success of the brand's efforts may be somewhat limited without them.
Genesis, Hyundai's new luxury brand, has become only the second luxury brand to be launched in the United States this century. This assumes that Tesla is considered a luxury brand based on its price and exclusivity, despite the electric vehicle (EV) manufacturer's intention of moving into mainstream segments. Supporting the US launch, Genesis held a media briefing and ride and drive of the brand's flagship G90 sedan recently, which IHS attended.
To launch the brand, Genesis has its own management team and dedicated platforms and products. All planned Genesis products will be based on front-engine, rear-wheel-drive platforms, as the company works to develop a drive feel and characteristic unique to the brand, according to the general manager for Genesis in the US, Erwin Raphael. Raphael eventually wants customers to understand and appreciate what it means for a vehicle to "drive like a Genesis". The cars will also take a unique design language different from any other in Hyundai Motor Company, although the G90 that IHS Automotive drove was not precisely in that direction. Instead, that proposed design language was previewed by a concept shown at the New York Auto Show in April.
Every brand needs a fresh and relevant product range to sustain itself, along with a strong strategy. While Genesis is being launched with only two sedans, 2017 model-year products the G90 (large) and the G80 (mid-luxury), by 2021 the brand will grow from to include the G70 near-luxury sedan, a mid-luxury sport utility vehicle (SUV), a near-luxury coupe, and a near-luxury SUV. The G70 will be positioned in the same market space as the BMW 3-Series. We expect the larger SUV to be on the G90 platform and the smaller on the G80 platform. Genesis did not confirm the timing of these products' introduction, but IHS Automotive forecasts that the G70 will arrive in 2018. The larger SUV is expected to arrive at the very end of 2018 and the smaller in 2020.
At launch, Genesis vehicles will be sold in a showroom-within-a-showroom environment at Hyundai dealers. While this enables Genesis to have a robust distribution network with well-qualified service centres quickly, the move is also related to US dealer-franchise laws, according to Hyundai Motor America CEO and president Dave Zuchowski. Hyundai has about 834 dealers in the US, with 415 of them part of the Equus subset. About 350 have chosen to stay with Genesis, Zuchowski said. Over time, however, Genesis would like to see that number trimmed to between 275 and 325, similar to the number of other luxury brands, and to begin an "organic migration" to Genesis-only showrooms. Genesis expects it may be five years before separate showrooms are seen − a timeframe also driven by product availability. Although the showroom-in-a-showroom model may be less preferable to standalone stores, it allows the Genesis dealership experience to grow with the brand's presumed increases in sales and product offerings. Although the pattern is different from those of other luxury brands, it may prove to be right for this brand.
As Genesis and Hyundai chose to develop a luxury brand, they needed to define their interpretation. Ultimately, the guiding mission, according to Raphael, is "Genesis will make every moment and mile matter". Raphael believes today's luxury vehicle provides a balance between the product and the experience. Time is precious − a non-renewable commodity − and luxury brands that incorporate services that help owners make the most of time spent around the high-quality goods are essentially what people will respond to, says the automaker. Genesis is setting itself up to deliver on this new form of luxury and will strive to offer a curated experience between product and experience. At the same time, Genesis understands that "product is the foundation… it has to be great", said Raphael. Genesis is not, however, the only luxury brand to note the trend. There will be competition on this side of the business, just as there is on the product side.
Some elements of the service side for Genesis will involve longer standard periods for certain amenities. Genesis will offer free scheduled maintenance for 3 years, 36,000 miles and complimentary valet service for three years, which is a strong product but not outstanding in the luxury space. We asked why Genesis went with three years as standard service, when some other luxury brands offer four years. The answer given was simply that most leases will be for three years, and leasing will be a strong component for the brand's buyers. Adding a fourth year would not give it any benefit, yet is factored into the cost. For connected car services, Genesis offers a longer period than the competition, with three years the standard service for Sirius XM and Traffic, navigation with map updates and Genesis connected car (the subscription behind the app-based services).
An example of the company looking to embed itself into a luxury experience, providing solutions that make life more convenient and save time for customers, is a tie-up with Amazon and its Alexa product. Genesis connected car services will be compatible with Alexa. As long as a customer has the connected car service and an Alexa device, he or she will be able to use Alexa to access the app and request it to send commands to the car while within a house; for example, locking or unlocking the car or setting a time and temperature for remote engine start. These are functions that the app does through an owner's smartphone as well; Alexa is a conduit to the app and cannot deliver a service not programmed into the app. Genesis is among the first to make this move and it makes a statement for what consumers should expect from the new brand.
Zuchowski said that among the reasons it is believed now is the right time for the launch of Genesis is Hyundai's experience over seven years of Genesis and Equus sales in the US. He also said that the Hyundai Genesis sedan reached number two in luxury retail sales, behind only the Mercedes-Benz E-Class, and that the car is number one in terms of customer loyalty. "We not only know how to attract buyers, we know how to keep them," he said. According to IHS Automotive data, the Hyundai Genesis sedan has seen its model-to-model loyalty rates increase over time, approaching 40% in the fourth quarter of 2015; our data show that it exceeded that of the Mercedes-Benz E-Class around the fourth quarter of 2014 and again in the fourth quarter of 2015. Genesis will need to grow strong loyalty rates as a brand for success over time, as well as see success in retaining Hyundai Genesis and Equus owners.
The existing Genesis sedan and Equus owners should provide a pool of owners likely to be positively predisposed towards the brand − something Acura and Lexus had to build up after launch. The association with Hyundai is not without advantages as well. Luxury brands with high-volume mainstream counterparts tend to have a large pool of buyers more willing to consider them; ultimately, the association with Hyundai may give Genesis access to a larger, interested buyer pool.
Outlook and implications
Genesis has a strong company plan and has been given significant, long-term product development and management resources. Our initial impression is that the brand communicates a high-end persona of luxurious vehicles. To succeed, Genesis needs strong execution, patience to weather the mistakes and adjustments that will inevitably need to be made along the way, and the ability to deliver consistently over several product generations − products that will also need to continue to improve in terms of execution and hitting the mark with consumers.
Among the weaknesses at launch is the sedan-only product range and, to a lesser degree, that the vehicles are evolutions of existing Hyundai products. The G90 is a significant departure from the Equus, but it is an evolution of an existing product. Although Genesis will introduce SUVs relatively quickly, SUVs are the growth segments within luxury and mainstream segments, while sales of sedans are under pressure. However, this approach also gives the brand the chance to make the most of what is a slower launch. Between now and when the first products arrive that are truly developed by the new Genesis leadership, the brand can further refine and deliver its message, the services that are so critical to being a luxury brand, and its product execution.
IHS Automotive currently forecasts the brand will see sales reach about 69,000 units in 2021, with a full product range on offer. This will put Genesis among the lower-volume premium brands in the US, but it will also be a higher volume than those of Porsche, Jaguar, or Alfa Romeo. Globally, we forecast the brand will see volumes reach about 195,000 units in 2021. IHS Automotive forecasts that the Genesis brand will draw most of its global sales from South Korea, with the US volume closely behind that of the home market. Outside of those markets, which will deliver 75% of Genesis sales, no single country is forecast to provide more than 6% of sales.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.