Sunday, June 10, 2018

Crunch Time: Would You Buy a $50,000 Hyundai?

The story of Japan's trailblazing role in East Asian industrialization is well-known: Once upon a time, American manufacturers looked down upon Japanese cars coming onto their shores. They beheld the tiny cars--and had a laugh. In the space of a few years, Japanese auto manufacturers soon had the last laugh as their products became more than serious competitors to American makes. Last year, foreign cars outsold domestic ones in the US for the first time ever, no doubt owing to the pioneering moves of the Japanese.

Stories about industrial development often follow Japan's trajectory and go something like this: You begin with labour-intensive things like textiles then move on to more advanced consumer goods requiring more technical expertise such as transistor radios and motorcycles. Having hopefully established an internationally recognized brand name for such items, you can then move on to even more sophisticated offerings like video game consoles (Sony Playstation, Nintendo Wii) and luxury cars (Lexus, Infiniti). In effect, today is Hyundai's crunch time like it was for Toyota and Nissan back in 1989 when they sought to move up the price ladder to compete wih the likes of German prestige brands Mercedes-Benz, BMW, and Audi. Nearly two decades later, Lexus and Infiniti are part of the luxury establishment that Hyundai is seeking a piece of the market of with its latest and most ambitious offering, the Hyundai Genesis.

Unlike the Toyota and Nissan efforts, however, Hyundai is not establishing a separate luxury brand to go after the German bigwigs, preferring to use the Genesis alone as a spearhead. Of course, it may not be so wise to establish a second luxury brand name in this day and age of dwindling car sales Stateside. Should the Genesis not live up to expectations, then it would be easier for Hyundai to retreat than if it establishes, say, its own dealer network for a Lexus/Inifiniti rival. The big caveat in the Hyundai strategy, however, is that cars with luxury aspirations sold under regular brand names have not had the best history. I have two cases in point, and troublingly for Hyundai, both are of sedans.

First, Mazda too decided to forgo marketing upscale cars under a separate nameplate with its Millenia sedan. I don't know if you remember it, but it's probably a sign that it didn't do too well that few do remember it. Second, Volkswagen's then-CEO Ferdinand Piech had (well, he still has them actually) delusions of grandeur and sold the Phaeton as a Mercedes S-Class rival. Motor-mouthed hack Jeremy Clarkson summed the Phaeton's failing best: All the luxury you need but no pizazz. Like many others, if I want a luxury offering from the VW-Audi Group, it will have four interlocking rings, thank you very much (an Audi). While Hyundai is not aiming that high--it's targeting the midsize E-Class instead of the larger S-Class, the stakes are still pretty sizable. Will its rich feature list make up for its lack of pizazz?

Car and Driver has just performed a test drive of the Hyundai Genesis and finds that while it does give you a lot of bang for the buck in the engine power, interior space, and gizmo departments, it does not drive as well as its comparable BMW rival. Though the German car is well and truly outgunned in the horsepower department, its dynamics are still rather superior. It will be interesting to see if the Hyundai can succeed where Mazda and Volkswagen have not. For sure, it will need a hefty dose of luck. That American consumers are rather broke doesn't help things much, either.

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