South Korea's Genesis is the best new luxury car on the market, and one you don't know

Hyundai Motor Co. Genesis G70 sedans on display during a launch event in Hwaseong, South Korea.
SeongJoon Cho | Bloomberg | Getty Images
Key Points
  • Genesis vehicles have been widely praised, but dealer troubles and a lack of awareness are big challenges. 
  • The brand will unveil a new network of standalone dealers within weeks. 
  • Just a small portion of shoppers are aware the brand even exists. 
2015 Hyundai Genesis
Getty Images

Genesis is a young and still-obscure luxury brand, with a complicated history, that's currently going through a time of tremendous change.

The new upscale model from Korean carmaker Hyundai will soon begin rolling out its widely praised 2019 mid-sized G70. The sports sedan, which starts at around $32,000, is competing head-to-head with other entry-level luxury models, including the Mercedes C class or BMW 3 series.

Consumer Reports ranked it the top automotive brand in February. It then topped JD Power's Initial Quality survey in June. Industry researchers AutoPacific, also that month, ranked a Genesis sedan highest in vehicle satisfaction.

But sales have fallen 50 percent over the last six months as the brand builds out an all-new network of U.S. dealerships and tries to differentiate itself from both competitors and its stablemates, Hyundai and Kia.

To make things even tougher, Genesis is trying to sell sedans in a market that has tilted toward SUVs.

With the Genesis, Hyundai's playing a long game. A very long game.

Within a month, Genesis will begin unveiling its new network of standalone dealerships, said Erwin Raphael, general manager of Genesis North America.

Genesis had long wanted about 100 separate stores to differentiate the brand from Hyundai. But it wrangled with many in the network of 840 Hyundai dealers across the U.S, many of whom were upset they might not be able to continue selling Genesis vehicles.

Finally, it appears to have arrived at a solution. Every dealer now can choose between converting to selling Genesis, building a separate store or accept what Raphael said is generous buyout offer.

The problem is while this has been happening the company has had to stop production and hold off on marketing the brand. The tight inventory has killed sales, Raphael said.

"We are not concerned about our sales at all," he said. "This is a process we have to go through to build a stronger foundation for Genesis."

The G70 will start hitting dealerships in August, soon after the announcement.

The G70 is Genesis's third vehicle, and it is the first developed entirely by the separate Genesis group within Hyundai. It has drawn comparisons with smaller German sport sedans, such as the BMW 3 Series and the Audi A4.

Kelley Blue Book senior analyst Rebecca Lindland drove the car in Korea in late 2017.

"It was impressive," Lindland said. "I think people are going to be blown away by it. The challenge is getting people to consider the both the brand and vehicle."

Only about 3 percent or 4 percent of consumers shopping on Kelley Blue Book, for example, are looking at the brand, she said. That contrasts with BMW, which attracts about 30 percent of Kelley Blue Book shoppers.

Genesis' lower-priced sister brands Hyundai and Kia attract about 20 percent and 15 percent, respectively, of shoppers on the site.

"I think the G70 can easily take on the 3 Series," she said. "You just have to get on that consideration list."

Raphael said lack of awareness is the brand's biggest challenge right now, but that it does not make sense to focus on building brand awareness as it was going through the transition with its dealership network. He said even their own data have shown that just up to 6 percent of shoppers are aware of the brand.

Raphael said Genesis plans to cast a wide net for new customers, looking beyond traditional luxury car buyers.

"In fact when we look at customers who can afford to buy luxury vehicles, a full 83 percent of them do not buy luxury vehicles at all," he said. "So there isn't a need to fight over the 17 percent who do buy luxury vehicles."

Genesis is also competing in segments that have been steadily shrinking: sedans.

Cars made up 56 percent of all premium vehicles sold in the United States in 2011, according to IHS Markit. By 2017, that share had shrunk to about 40 percent. SUVs did almost exactly the opposite in the that same period, going from 40 percent in 2011 to 57 percent in 2017.

The brand has already announced it will make two different SUV vehicles, but has not released any details on them.

“For better or worse, they are starting sedan products,” Brinley said. “You can get to volume faster with SUVs and crossovers.”

At the same time, getting to volume quickly is not as important as getting the relationship with customers right, as the company is trying to do with its focus on dealerships, she said.

And the shift to SUVs has been more rapid and dramatic than many in the industry had thought, she added. And the pendulum could swing in the other direction back toward sedans, she said.

Furthermore, if Genesis really is in it for the long haul it will have to build out a full lineup of cars no matter what they start with.