November 4, 2015 / 2:15 AM / 2 years ago

Hyundai launches Genesis premium car brand in bid to end profit skid

SEOUL (Reuters) - South Korea’s Hyundai Motor Co (005380.KS) 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.

An employee sits in front of the logo of Hyundai Motor Co. at its dealership in Seoul, South Korea, October 22, 2015. REUTERS/Kim Hong-Ji

The launch comes weeks after Hyundai, the world’s fifth-biggest carmaker along with its Kia Motors Corp (000270.KS) 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) while Nissan Motor Co (7201.T) owns Infiniti.

“Genesis will target the same market position as Lexus, but ultimately it has to compete against (Daimler AG’s (DAIGn.DE)) Mercedes-Benz S-class and (BMW AG’s (BMWG.DE)) 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.

The Genesis line-up will start with two sedans this year, including the existing second-generation Genesis sedan, to be rebranded the ‘G80’, and the soon-to-be-launched Equus luxury sedan which will be renamed ‘G90’.

The line-up will grow to six by 2020, with the addition of a luxury sedan, a sports coupe and two sport-utility vehicles. Hyundai didn’t disclose pricing plans, but said all six models will be equipped with what Hyundai described as high-performance, environmentally friendly powertrains.

Additional reporting by Se Young Lee; Editing by Stephen Coates and Kenneth Maxwell

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