Hyundai launches Genesis premium car brand in bid to end profit skid
By Sohee Kim
SEOUL (Reuters) - South Korea's Hyundai Motor Co (005380.KS: Quote) said on Wednesday it will launch a new global luxury car brand called Genesis, targeting fat profit margins from high-end motorists to help it reverse out of a protracted earnings slide.
The launch comes weeks after Hyundai, the world's fifth-biggest carmaker along with its Kia Motors Corp (000270.KS: Quote) affiliate, reported a seventh straight drop in quarterly profit. The strong Korean won has undermined overseas sales, just as foreign rivals have stiffened competition at home.
Rebranding the existing Hyundai Genesis sedan as a launchpad, the premium cars fit with Chairman Chung Mong-koo's cherished ambition to nudge a carmaker known for cheaper vehicles more upmarket. But in a crowded segment, Hyundai will have to take on brands like Mercedes, BMW and Lexus in markets from the United States to China.
"This is a smart strategy of launching a luxury brand based on the success of Genesis sedans, unlike Lexus and Infiniti which came out of nowhere," Kim Jin-woo, industry analyst at Korea Investment & Securities. Lexus is owned by Toyota Motor Corp (7203.T: Quote) while Nissan Motor Co (7201.T: Quote) owns Infiniti.
"Genesis will target the same market position as Lexus, but ultimately it has to compete against (Daimler AG's (DAIGn.DE: Quote)) Mercedes-Benz S-class and (BMW AG's (BMWG.DE: Quote)) BMW 7 series," Kim said.
Investors welcomed the new strategy, sending Hyundai shares 1.85 percent higher to closer at a one-month peak, outperforming the broader market index which rose 0.21 percent.
Korea Investment & Securities analyst Kim said Hyundai's push into the high-end auto market - complete with the hiring of Luc Donckerwolke, former chief designer at Bentley - had been anticipated, but had come earlier than industry expectations. He said squeezed profits might have push the carmaker to make a quick decision.
Two people close to the company told Reuters, which reported the plan on Tuesday, that some of Hyundai's U.S.-based executives are concerned the company may be rushing the launch of a standalone premium brand, considered a major undertaking. The company declined to comment. Continued...