Hyundai, VW Look To Move Upmarket With New Models

By Kelsey Mays  on January 23, 2008

Would you pay $40,000 for a sedan from Volkswagen — or from Hyundai? Both automakers are betting that at least some consumers will part with Lexus- or BMW-type money for their latest creations. Aside from each having four doors, the cars are seemingly disparate: The Volkswagen Passat CC is a four-seater with coupe-like styling, while the Hyundai Genesis is a bigger, full-blown luxury sedan. For their respective brands, though, each car represents a gamble by going upmarket.

At Volkswagen’s straight-laced confines in Detroit’s Cobo Center, head spokesman Steve Keyes seemed upbeat about the Passat CC’s chances. It won’t be another Phaeton, he assured us, referring to a $65,000-plus juggernaut Volkswagen unleashed earlier this decade that was a resounding sales failure.

“This maybe should have been the car we had before the Phaeton,” Keyes said, adding that the Passat CC will start “in the mid- to high 20s.” The two examples at Volkswagen’s display were loaded to the gills with massive sunroofs and button-strewn dashboards, while press materials detailed high-tech features like lane-departure prevention systems, dynamically adjustable suspensions and even a self-parking feature. Keyes said the cost of a fully loaded Passat CC hasn’t yet been determined, but it will likely be much more than the regular Passat, which tops out around $40,000.

Volkswagen does sell one model in this price range — the Touareg — but it’s an SUV, not a premium sedan. This is definitely new territory for VW, Keyes said.

It may not be as risky as it sounds. Lonnie Miller, an automotive analyst at R.L. Polk & Co., said the Passat CC isn’t a major stretch for the automaker, as many buyers already see Volkswagen as a premium brand. It should attract its share of upward-leaning Passat buyers, though the car may have more trouble gaining traction with buyers less familiar with VW.

“I think their challenge will be from an entry-luxury audience,” he said. “You’re not going to get the intuitive luxury buyer looking at the Passat.”

Would those shoppers look at Hyundai’s new Genesis? The rear-wheel-drive sedan can come equipped with a leather-wrapped dashboard, navigation system and Hyundai’s first V-8. Though it will compete with large sedans like the Toyota Avalon and Chrysler 300, Hyundai compares it to pricey nameplates like the BMW 5 Series and Mercedes E-Class.

Miller sees the car as a stretch for Hyundai, but one buyers will entertain.

“The Genesis is a step, but Hyundai is already in a state of flux in terms of growing their portfolio,” Miller said. “They might have more permission from the market to be going this far with this vehicle.

“Hyundai and Kia, they’ve been stretching. I think their most challenging thing will be that you’ve always been able to get a Hyundai [for] under $30,000.”

Hyundai product planner Michael Deitz said he expects the bulk of Genesis models to sell for “upwards of $35,000” — albeit with the V-6 engine, not the top-of-the-line V-8. That price is a leap for Hyundai, but it isn’t unprecedented.

“I remember when I came to an organization that said you don’t sell a car over $25,000,” Deitz said. He’s been at Hyundai for four years.

“The Veracruz transaction price is in the $36,000 range,” he said, referring to the full-size SUV Hyundai advertisements compare to the Lexus RX 350. “That’s what really measures growth in our organization.”

He called the Genesis a “natural progression” for Hyundai buyers, but added that the carmaker will provide a different buying and ownership experience for Genesis buyers to differentiate the car from its less-expensive siblings. He couldn’t provide any details, but said Hyundai is detailing the specifics with its dealers.

Will that help bring luxury buyers into the Hyundai fold? That will be the Genesis’ toughest challenge, Miller said.

“They haven’t had any experience overlapping with the luxury base, so that will come in with execution of the product itself,” he said. “[The car] has to say something about the buyer. To the person who says, ‘I’ve got to have a Mercedes or a Bimmer,’ Hyundai’s going to have a problem.

“They are still the new kids on the block in terms of automotive brands. … Their freshman year with this better be strong so they attract future luxury buyers.”

More Hyundai Genesis News (KickingTires)
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Senior Consumer Affairs Editor Kelsey Mays likes quality, reliability, safety and practicality. But he also likes a fair price.  Email Kelsey