South Korea's Hyundai Motor 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.
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The launch comes weeks after Hyundai, the world's fifth-biggest carmaker along with its Kia Motors 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 while Nissan Motor owns Infiniti.
"Genesis will target the same market position as Lexus, but ultimately it has to compete against Mercedes-Benz S-class and 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)