December 20, 2010

Confession #16: Hyundai's out in front

If you had told me, or anyone for that matter, in 2001 that 10 years later, the Hyundai Sonata would land on Car and Driver magazine’s 10 Best List and be one of the best-selling midsize sedan – just behind the perennials Toyota Camry and Honda Accord – I wouldn't be the only person laughing.

But crazier things have happened, such as Lady Gaga and Lindsay Lohan. Or things ending in Gosselin or Palin.

Then it’s less surprising that the South Korean carmaker, part of an industrial giant that used discarded Mitsubishi designs as the basis for its first vehicles, is now being compared not just to mainstream carmakers like Toyota or Ford, but premium brands like Mercedes-Benz and Lexus.

Perhaps a significant example is how dealers are embracing Hyundai. Close to my home, a high-end group of new car dealers filled a vacant space with Hyundai after they dropped their Infiniti franchise last year. Now there are new Sonatas and Elantras parked among new Range Rovers and Jaguars.

Even three years ago this would have looked like an illogical pairing, one that would have cheapened the image of the business. But in today’s still-battered economy, a car that looks like a Mercedes-Benz CLS but is priced like a Chevy Malibu still looks good parked next to a luxury car, regardless of the fact it wears a Hyundai badge.

Consumers know they’re in an environment where having a flashy badge isn’t as desirable as it used to be. It’s like buying a generic brand. Most buyers these days know a store’s no-name label is, in most cases, just as good as the one with the Italian name that costs almost twice as much.

OK, so Hyundai hasn’t quite nailed everything. The Genesis luxury sedan, launched just in time for the financial crisis in 2008, has sold better than a lot of big luxury sedans like the Volvo S80, Lexus GS, Cadillac STS and Audi A6, all of which cost much more. But it’s failed to take down the Lexus ES, Buick LaCrosse and Ford Taurus, which are about the same price, and aren’t as good according to some reviewers.

And it’s really anyone’s guess how the company’s top-line Equus sedan will fare against the Mercedes S-Class and Lexus LS. Even though Hyundai’s setting up only selected dealers with separate Equus sections, they’re offering to deliver the car to prospective clients so they never have to see a lowly hatchback on the dealer’s lot.

Of course, many doubted Toyota’s efforts with Lexus more than 20 years ago. The first LS was a success partly because it undercut Mercedes, BMW and Jaguar, but also because it was in numerous ways a better product.

I still don’t think Lexus has really nailed the same panache and emotion that Jaguar and BMW have, or the solidity of Audi or Mercedes. But objectively, Lexus has done fantastic work.

Regardless of Hyundai’s luxury aspirations, their bread-and-butter models are seriously good and serious threats to Toyota and Honda, whose buyers are getting older and styling and quality haven’t set any new standards.

And the domestics, hoping to earn resurgence among younger buyers not wanting to be caught dead in their dad’s Camry, could come up short against the Koreans.

And remember, the Hyundai universe also includes Kia, another brand with rapidly escalating sales figures and selling cars based on Hyundai’s stellar designs.

2011 is bound to be very interesting and I wouldn't put it past the Koreans to set another sales record next year. Will the Japanese and Americans take notice? Wonder what their New Year's Resolutions are?