I saw a short segment on CNBC this morning about Hyundai. Their lead:

Hyundai is cheering the result of a closely watched survey, JD Power & Associates has named Hyundai the highest ranked non-premium brand in its 2009 initial quality study.



That's all well and good, but the conversation took a turn for the unexpected. John Krafcik, Acting President and CEO of Hyundai Motors America, said that they expected to compete in the luxury market. In the clip, they talk about the new Hyundai Genesis luxury sedan, which Krafcik says ranges in price from $33,000 to $42,000. Unfortunately, I think Hyundai will have an uphill battle on their hands competing for luxury customers.

First, in case you'd like to watch, here's that clip. My favorite part is when Joe Kernen awkwardly says to Hyundai's CEO, "I mean this is a nice car. It's not what I think of with a Hyundai":



In the clip, Krafcik also tells us that JD Power ranked Hyundai 4th in overall quality, trailing only Lexus, Porsche and Cadillac. Their Genesis also matched the Lexus in overall quality.

Yet, I'd be really surprised if Hyundai's luxury models outsell many of those other luxury car companies it beat out in quality like Mercedes, BMW or Audi in the next decade. Honda, the company I most closely associate with Hyundai, has never succeeded in the luxury space, though I'm not sure they've made much effort. Toyota has had success with Lexus, but it didn't even attempt to launch the line until 1989 -- well after Toyota was established as a great car company. Toyota also used a separate name for their luxury line, probably to denote Lexuses (or Lexi?) weren't just regular Toyota cars.

The luxury market is strange. It isn't about what car necessary performs best, or even looks the nicest. It's about status and brand name.

No matter how high Hyundai's quality rankings, they need to overcome public perception of Hyundai being a lowbrow brand. The only way to do that is with time, or marketing tricks. Maybe I'm cynical, but I'm unconvinced that the Lexus LS400 would have taken off the way it did if it were called the Toyota LS400. Having a separate name for your luxury line might seem a little gimmicky, but it certainly worked for Toyota. I'm a little surprised that Hyundai didn't try to follow suit.

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