With mass car market in stress, Hyundai eyes luxury segment

Written by Roudra Bhattacharya | New Delhi | Updated: Dec 23 2013, 13:57pm hrs
Equus, HyundaiThe Equus is Hyundai?s most expensive model and in some markets does not use the Hyundai badge to reflect a more upscale image
The countrys second-largest carmaker, Hyundai, is studying the growing luxury car market which is today the stronghold of German trio Audi, Mercedes-Benz and BMW. The South Korean carmaker is considering a foray into the segment with its top-of-the-range models like the Equus and Genesis sedans, and the Veloster compact sports car, for which it could set up a separate sales network.

The strategy to enter the luxury market follows Hyundais recent focus of building a more upmarket image for the brand and slowly moving up the chain towards premium vehicles, even as it maintains its hold on the mass market of compact cars. Recent launches in the premium space include the Elantra and Sonata sedans, while a new Santa Fe SUV is expected to follow next year.

We are studying the luxury space right now, though there is nothing definite yet. Apart from Equus, there are more luxury models in the Hyundai range. However, we will need a different network to sell these cars. We are gauging customer acceptance of Hyundais luxury car range and then we will take a decision, a Hyundai India official told FE. However, the official did not specify a timeline for launch, or if they will be assembled at Hyundais plant near Chennai.

The Equus is Hyundais most expensive model and in some markets does not use the Hyundai badging to reflect a more upscale image. It is currently sold only in select markets like South Korea, North America, China and the West Asia. Meanwhile, the Veloster sports compact targets the youth with its unconventional design.

The luxury car market requires a very different end-to-end long-term strategy in terms of marketing and channel partners. One school of thought is that it will be tough to establish a new brand, but we have been heading towards the premium end progressively with new launches like the Verna, Elantra and Sonata, another company official said.

Indias luxury car market is expected to grow over 20% in FY14 to about 35,000 units, from around 29,000 units in FY13, with Audi becoming the first company to record over 10,000 units annual volumes. In comparison, the total passenger vehicle volumes have contracted over 5% to 16.4 lakh units in April-November FY14 largely because of slower sales of mass-segment models.

Other major players are Jaguar Land Rover and Volvo. Toyota has also been planning to launch Lexus, but has put the plan on hold due to rising import costs on account of a strong Yen.

Puneet Gupta, principal analyst, IHS, said launching a luxury brand would be a good strategy for Hyundai, though it is more about placing the brand than the volumes per se. Opening different dealer networks make sense, because consumer expectations are different in the luxury segment. At some stage most mass carmakers have to come with their luxury range in an emerging market like India. It is a good idea to establish the luxury brand early, because later competition will get tough after Toyotas Lexus and others enter.