Genesis Exec Details Uphill Battle for New Luxury Brand

Hyundai is on an ambitious journey, spinning off its Genesis and Equus sedans into the foundation of a standalone premium brand.

And while much of that campaign will take place in Hyundai showrooms in the U.S. and beyond, the Canadian market will play host to a direct sales approach à la Tesla, where cars will be available for purchase through online sales and downtown retail and shopping mall locations across the country.

In Vancouver for the launch of the 2017 Genesis G90, the brand’s flagship model and the first to go on sale later this year, AutoGuide.com sat down with Canadian director of Genesis Motors, Michael Ricciuto, to get some insight into how the premium brand plans to operate.

Q: The Genesis and Equus were pretty well received; how do you build on that success with a spin-off premium brand?

A: In 2009 we won North American Car of the Year with Genesis and that was our first attempt at playing in that premium segment. Then with the Equus – which to me was wonderfully executed – we’ve proven that we can build products that can compete against the world’s finest premium brands.

Q: Why now?

A: There’s no really good time when you’re trying to convert products that are in your lineup into a new brand, but when you’re launching your flagship model that’s a pretty good time to do it.

Q: What makes the Genesis brand a viable venture for the Hyundai Motor Group?

A: From a business perspective, obviously we have the mass market brands, so we can leverage the economies of scale from that and design premium products that are a notch above. Plus, it also allows us to develop technologies that the premium segment will pay for, and then those technologies will work their way down into the mass market brands. Without that platform how do you develop things like head-up display? Because you’re never going to do a head-up display and put it in a (Hyundai) Sonata. It’s just too expensive and you’ll never recoup your investment. But you can put it in a (premium car), get the cost down and then, over time, work that into the other products.

Q: What is the approach Genesis is taking going into this?

A: We want to totally rethink the way that we go to market. Why do you have to go and buy a car that has extra fees on top — the destination and delivery charges and etching for theft deterrents? And then there’s so many options and packages, and the salesperson has to go talk to their manager about price. So we’re going to take all that out of the equation and it’s going to be a fixed price. We know you’re going to have to maintain your car, so why not pre-pay that up front? So having a complete package and price transparency and the ability to not have to go to the dealership — the dealer will come to you to test drive a car, they’ll come to you to pick up your car for service — and really changing the way that consumers are buying cars. We’re brainwashed to thinking we have to go to a dealership and go through that process but we don’t. Why can’t you go shop for a car at a mall? And when you’re ready to take a test drive just sign up and they come to your house and deliver a car. It’s that whole mindset we’re trying to change and to make it a much more pleasurable and stress-free experience.

(Editor’s note: The direct sales approach is unique to the Canadian market for the Genesis brand.)

Q: What brought on this direct sales model?

A: We know we have to separate the brands and we were able to make that decision primarily because our volume isn’t huge. The U.S. volume is significant so they couldn’t start from scratch and develop a whole standalone dealer network because of the impact on the volume. So they’re going to transition from what we call a “showroom in a showroom” to eventually down the road, in five or ten years from now, standalone dealers. The market in Canada for luxury cars is fairly concentrated. There’s only really 10 cities that account for about 90 percent of the sales. So once you have dealerships in those 10 cities you’re in the game. So we decided to focus in on eight cities — Halifax, Quebec, Montreal, Ottawa, Toronto, Calgary, Edmonton and Vancouver — and put in a retailing network and have a go at it. It’s going to take us a year or two to get fully up and running and we’ll have to take a hit in volume for a year or two, but it’s something that the corporation allowed us to do.

Q: What’s going to set the Genesis brand apart from the competition?

A: We’re going to have products that are very well equipped from the get-go. The G80 will have Nappa leather, open-pore wood trim, panoramic sunroof and navigation all as standard equipment. And really, when you get into this segment those are the features customers really want. Nobody wants to buy a base model luxury car with pleather seats and no sunroof, so why would we build it? Everyone thinks you’ve got to chase this low starting price, but nobody ever buys it. We know what customers really want, so why not deliver that to them? So that’s going to be a key differentiator from a product perspective. The other one is how we go to market. It’s going to be a stress-free customer experience and we’re going to bring the car to you.

Q: How do you build brand loyalty starting from scratch?

A: It’s going to be hard. We know that the premium car brands have very loyal customer bases, and obviously they have good products and they have decent sales and services experiences, so it’s going to be hard to steal some of those customers away. But there’s a real group of consumers— most of them are Gen X but some millennials — that have never experienced premium products. And so they’re going to move from the mainstream brands into the premium brands, and usually the first step is into the near-premium brands like Acura and Infiniti, so we think that we can intercept those customers to think of us as a luxury brand — as a move-up brand. So that’s where we think we’re going to conquest from. And there’s actually still a lot of people that do bounce around [from brand to brand].

Q: What’s the biggest challenge facing the Genesis brand?

A: The biggest challenge by far is having that authenticity that we are a luxury brand. To make people really think that that Genesis badge on the back of the vehicle is a true luxury product.