Hyundai Plans 50,000 Genesis Sales Annually, Will Launch Sonata Hybrid in 2010
By Chris Haak
08.21.2008
Yesterday, Hyundai announced that it expects to sell 50,000 Genesis sedans and coupes annually, although its specific projections for 2009 have not been finalized. The Genesis sedan, which Hyundai is marketing as a competitor to the BMW 5-series, while pricing it thousands less. The Genesis Coupe has not launched yet, but will be slightly smaller, and will feature a range of engines from a turbocharged four cylinder to a 300-plus horsepower 3.8 liter V6, and will be priced far lower than the $33,000 entry point for the sedan. The Genesis coupe will be positioned as a competitor to the Mustang, Challenger, and 350Z.
Hyundai expects to sell 8,000 Genesis sedans during 2008, and the coupe will be launched in the first quarter of 2009. I find it curious that Hyundai chose to apply the Genesis name to both the sedan and coupe, because although they share the same basic architecture, they are in fact very different vehicles. The coupe is not a two-door version of the Genesis sedan, but is more of a larger rear wheel drive successor to the Tiburon coupe (although the Tiburon will likely be replaced in the next few years by a new front wheel drive vehicle at a lower price point than the Genesis coupe will be priced at).
One thing I’ve noticed about Hyundai’s US sales estimates over the years is that they generally have little basis in reality. When Hyundai’s US sales started to grow fairly steadily in the earlier part of this decade, certainly due in no small part to a broader lineup, excellent warranty coverage, and improving initial quality scores, Hyundai continued to assume that it would achieve ever-increasing sales in the US market. In 2007, the company hit a headwind, missing its objectives by over 15% (its initial goal was 550,000 units, but it sold 467,009 instead). This year, the company’s reputation for small cars has actually been a good thing, with sales down 3.0% through July 31, in a market that’s down 10.5%. But the thing is, Hyundai’s larger, more expensive, higher-margin vehicles – the Entourage (down 74% YTD), Azera (down 12.2% ), Santa Fe (down 14.7%), Tucson (down 44.3%) are all suffering this year, with the exception of the Veracruz (up 34.1%), which is a relatively new vehicle. Meanwhile, sales of the Accent (up 56.2%) and Entourage (up 25.1%) are totally driving the company’s less-severe-than-the-market sales loss. Hyundai’s car sales are up 9.7% year to date, while its truck sales (three CUVs and the van) are down a substantial 27.9%. Further, even the car sales numbers tell the story of a problem, because the just-refreshed 2009 Sonata is down 6.2% year to date, while most of its midsize FWD sedan competitors (Camry, Accord, Malibu, Fusion, etc.) are either seeing flat sales (Camry) or are up (Accord up 12.2%, Malibu up 37.0%, Aura up 21.4%, Fusion up 11.9%). These numbers tell me that Hyundai still has a reputation as a purveyor of solid, if unremarkable, and cheap transportation. So how will a company selling all the Accents and Elantras it can get (for well under $20,000, by the way) expect to sell a $33,000 to $38,000 V6 and V8-powered luxury sedan at the same dealership?
Well, part of Hyundai’s answer is to remove all Hyundai nameplates and logos from the exterior of the Genesis, except for a single cooked-H on the decklid. The other, of course, is to play up the value message of the Genesis, and as expensive as the car will be compared to the rest of the lineup, it really sounds like a great car according to the spec sheet – a $500 million development program, all-new V8 engine, excellent fuel economy for its size, spacious passenger compartment, ZF transmission in the V8 cars, and all of the luxury features expected in its class. Frankly, no matter how great the car is (and early reviews have been generally positive), I see the 50,000 mark being a pretty long stretch goal. The company is unlikely to meet its 500,000 unit sales objective for 2008 (considering the condition of the market, and that they’re 3% below last year’s 467,000 unit pace), and I have trouble envisioning over 10% of the company’s sales coming from their most expensive, most powerful product in a small car-loving market. Buyers will probably, unfortunately, have to answer questions from friends like, “you paid HOW much for a Hyundai?”
In other news, Hyundai confirmed that they will launch their first US hybrid as a 2010 model. Unlike the Toyota playbook with the Prius (also later adopted by Honda for its Insight to re-launch early in 2009), Hyundai is taking a page out of GM’s hybrid playbook by basing it on an existing model. In this case, it will be based on the Sonata midsize sedan. Hyundai has not confirmed if it will be a V6 hybrid like the ill-fated Accord Hybrid, or a four cylinder hybrid like the Aura, Malibu, Camry, and Altima hybrids (my money is on a four cylinder). The forthcoming Sonata Hybrid will have lithium ion batteries, which GM is planning to use in its future Saturn Vue Plug-In Hybrid as well as the Chevy Volt. Lithium Ion batteries are more compact and powerful than conventional NiMH batteries used in current hybrids (meaning better performance, less sacrifice of storage space, and longer battery life), but they bring a host of other technical challenges, not the least of which is their occasional propensity to get hot or catch fire. (Remember the Sony laptop battery recall?) However, once the heat/fire challenge has been adequately addressed, LiIon batteries are probably the near-term future in hybrid technology. Lastly, Hyundai explicitly stated that the Sonata Hybrid will not be plug-in compatible – which is sometimes possible with LiIon batteries because of their higher capacity – although some competitors’ hybrids will be around that timeframe.
Just like Lexus turned the luxury world on its ear in 1989 with the launch of the LS, giving all of the luxury and comfort of the established brands at a bargain-basement price, the Genesis has the potential to do something similar to the established players 20 years later, except it won’t have the luxury of its own brand or dealerships helping it. I predict that the Genesis will be a moderate success for Hyundai, but also do not expect them to meet the 50,000 units per year objective in 2009 or in any other year in the near term unless the economy significantly improves and fuel prices fall drastically.
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