Monday, December 31, 2012

Kia Exec Says Brand Will Compete with Luxury Automakers by 2017

Kia Exec Says Brand Will Compete with Luxury Automakers by 2017:

Hyundai spent the previous decade boasting that by 2010, the Korean automaker would be a serious competitor to Mercedes-Benz and BMW. It didn’t happen. Now it’s Kia’s turn. Kia vice chairman Hyoung-Keun Lee announced the automaker will become a premium global player over the next five years. The models will be on the same level in terms of style and sophistication as the top German and Japanese brands. The mind-boggling statement was made last week at a dealer meeting in New Zealand, where Kia’s local arm issued a press release saying as much.
Industry reaction is summed up in four words: Here we go again. Hyundai owns Kia, but it appears the left hand doesn’t know what the right hand is doing, or in Hyundai’s case, still trying to accomplish. Specifically, Hyundai still is attempting to gain respect for its big premium model, the Equus.
So what’s the basis for Kia’s premium intent?
Kia’s flagship is a big, attractive rear-drive sedan, called the K9 in Korea and the Quoris in other markets. The redesigned car went on sale this year in Korea; U.S. sales are expected in 2014. The K9 shares its architecture with the Equus and is expected to sticker here at around $55,000. Under consideration is the sleek rear-drive GT concept that debuted at the 2011 Frankfurt motor show. Kia displayed the concept this year in Los Angeles, New York, and other cities to gauge reaction.

Early last decade, Hyundai made it clear that it wanted to create a premium brand for the U.S. market. But analysts, auto journalists, and many Hyundai dealers signaled the same message to Hyundai’s executives in Korea: Hyundai is a work in progress. Specifically, the brand consists of low-priced models, styling is unimaginative, and Hyundai quality remains questionable at best in the eyes of U.S. buyers. Who can forget the problems with the 1980s Excel? Quality and styling have been licked, but Hyundai still is perceived as an alternative to Chevrolet and Ford.
Instead of creating a separate luxury brand, a costly proposition, Hyundai sells the Equus and the Genesis under the Hyundai banner. The Equus starts at just more than $60,000 and is aimed at the sticker price of the Mercedes-Benz E-class, while proportionally similar to Benz’s S-class flagship. The $35,000 Genesis targets the Mercedes C-class in price, while providing E-class–like roominess. Neither car has caught on with traditional luxury-car buyers.
Kia’s U.S. history is shorter and the long-term quality of its products is inconclusive—U.S. sales began in 1994. Like its parent company, Kia also is viewed as a Chevy and Ford alternative. Only in recent years has the styling become a selling point, thanks to the hiring of Peter Schreyer, who previously penned Volkswagens and Audis.

Contrast that to Toyota’s strategy leading up to Lexus. The Japanese brand took small steps, building its U.S. reputation in the 1960s, 1970s, and 1980s on value and quality. After proving itself for about three decades, Lexus was launched in 1989. By that time, many Toyota owners were not hesitant to spend more and move up market.
Kia can boast about its intent to market premium cars, but in the eyes of U.S. buyers, Kia remains an unknown quantity. There are no shortcuts to earning a good reputation, which is mandatory to attract premium car owners.
Kia wading into the segments occupied by Audi, BMW, Lexus, and Mercedes by 2017? That’s way too soon. The year 2025 might be a more realistic target for success.

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