Genesis Standing Alone as a Luxury Sedan Brand in the U.S.
Market: Barriers against the Market Performance
A decade has passed since the first generation of Genesis was launched in the U.S. with the plaque of Hyundai-Genesis. Genesis Motors was separated from Hyundai Motor in 2015, and has struggled to have the Genesis stand alone in the competitive U.S. luxury sedan market. The present case study aims to find challenges facing the Genesis, which Hyundai has positioned as a luxury sedan competing against conventional luxury brands such as BMW, Mercedes-Benz, and Lexus evaluate Genesis Motors’ strategic response to meet these challenges and explore an alternative positioning strategy. Specifically, the present case study addresses barriers against the Genesis’ market performance, by focusing on the obstacles rooted in the consumer perception as well as the obstacles that stem from the change in the U.S. automobile industry and the nascent network of the Genesis dealership. Genesis Motors’ current strategies are evaluated, and an alternative strategy is explored that is largely based on the American consumers’ perceptions of the Genesis vis-a-vis conventional luxury brands and outperforming midsize brands.
Hyundai Motor Company introduced the first-generation Genesis worldwide, including in the U.S., in August 2008. The Genesis was Hyundai’s first entry into the luxury market segment in the U.S. and was the largest, most powerful car that had ever been marketed by Hyundai prior to the launch of Equus. The first-generation Genesis was replaced with the debut of the second generation, G80, in the international motor show in 2015, and the G80 is currently sold as an anchor model in the U.S., together with G90 as a flagship model and G70 as a luxury sports sedan. Whereas the Genesis has been marketed as a brand name separate from Hyundai in the domestic market, it used to be associated with its parent brand in the U.S. until 2015 when it began to be marketed as a standalone brand.
The association of a new luxury brand with its parent brand that previously appealed to the segments of compact car and midsize family sedan was not the method adopted by other Japanese manufacturers introducing luxury sedans, such as Lexus and Infinity, which were separated from Toyota and Nissan, respectively. Hyundai Motor’s rather extraordinary strategy to associate the Genesis with Hyundai could be justified by the strategic goal to enhance its brand equity by capitalizing on the success of the Genesis in the luxury car market. The association of Genesis with Hyundai was also inevitable due to the prohibitive cost of the construction of independent dealerships for the Genesis. However, controversial debates and criticisms continued over the strategic choices of Hyundai Motor in introducing Hyundai-Genesis as a new entry in the luxury car market.
Resolving this controversy and criticism, in November 4, 2015, Hyundai Motor officially announced the separation of Genesis from its parent brand by establishing Genesis Motors as a new luxury vehicle division. According to Hyundai Motor, the decision to have the Genesis as a standalone brand was based on the asserted success of the Hyundai-Genesis in the U.S. since its introduction in 2008 and was propelled by consumer demand for a separate Genesis division. The new spinoff, Genesis Motors began to market G80 and G90 in late 2016 and G70 in late 2018. However, despite the line extension, the current sales figures of all models of the Genesis indicate that the market performance is at risk. In 2017, the monthly sales volume was steady around 1,700, and the annual sales volume did not fall short of the 20,000 figure that Hyundai Motor initially aimed to achieve in 2009, the first full year of sales in the U.S. The Genesis’ monthly sales volume began to decline in 2018 from 1,948 in December 2017, which was the highest volume sold since the spinoff of Genesis Motors, and plunged to 372 in October 2018 followed by 417 in the next month.
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In January 2018, Genesis Motors announced to distinguish 840 franchised dealers into Hyundaionly dealers, who are only permitted to sell Hyundai brands, and Genesis-selling dealers, who are qualified to sell Genesis brands as well as Hyundai brands in separate showrooms. The transition of the franchised dealership caused instability of supply, accounting for the decline in sale volumes in 2018. However, it appears that the decline in sales volume is not only attributed to the retailer-related factor but is exaggerated by the brand reputation associated with the Genesis. It is widely accepted by industry experts that the Genesis is an impressive vehicle, such that a number of institutions ranked the Genesis at the top in their evaluations and surveys. However, industry experts also note that, although the Genesis as a vehicle is impressive, the Genesis as a brand is not seriously considered by consumers seeking to purchase a luxury sedan. The discrepancy between industry experts’ appraisals for the Genesis as a vehicle and consumers’ lack of proclivity towards the Genesis as a brand is clearly revealed by the analysis of consumer perception. Kelley Blue Book noticed that only three or four percent of consumers shopping on the Kelley Blue Book site are looking at Genesis. The number contrasts with BMW, attracting about 30 percent of Kelley Blue Book shoppers, as well as the Hyundai’s and Kia’s lower-priced brands, attracting about 20 percent and 15 percent of shoppers on the site, respectively (https://www.cnbc.com/2018/07/18/korean-car-brand-genesis-is-praised-by-critics-but-unknownto-buyers.html). The Kelley Blue Book analysis also notes that only six percent of shoppers are aware of Genesis. Thus, although the Genesis is challenged by the transition of dealership network, a thornier challenge may stem from consumers who can afford to buy luxury vehicles but are not willing to include it in their consideration sets.
The goal of the present case study is to find the challenges facing Genesis Motors positioning the Genesis as a luxury sedan in the U.S. market, to evaluate Genesis Motors’ strategic response to meet these challenges, and to explore an alternative positioning strategy. The present case study does not aim to scrutinize marketing tactics that Genesis Motors may employ to enhance the consumer perception. Instead, the present case aims to examine Genesis Motors’ positioning strategy to have the Genesis compete in the very competitive luxury sedan segment by forgoing a midsize sedan segment in which the Genesis may sustain its competitive advantage. For the aim, the present case study addresses the American consumers’ current perceptions of Genesis vis-à-vis conventional luxury sedan brands such as BMW, Mercedes-Benz, and Lexus as well as some outperforming midsize sedan brands such as Honda Accord and Toyota Camry. Based on the analysis of consumer perceptions, Genesis Motors’ strategic choice to position the Genesis as a luxury sedan is evaluated, and an alternative positioning strategy is explored.