Hyundai Vice Chairman Euisun Chung announces plans for the new Genesis brand in Seoul.

Hyundai is formally entering the luxury car business. The maker has reversed course and now will launch a separate upscale brand called Genesis.

The Korean carmaker first dipped its toe in the luxury market nearly a decade ago with the launch of the first Genesis sedan, but until now had said it would not create a separate brand because of the high costs and risks such a move would entail. But it appears to have reconsidered that reluctance with the recognition that upscale products have been delivering a disproportionate share of industry profits in recent years.

“We have created this new Genesis brand with a complete focus on our customers who want smart ownership experiences that save time and effort, with practical innovations that enhance satisfaction,” said Euisun Chung, Hyundai Motor Company Vice Chairman and a grandson of the company’s founder.

The new Genesis brand will debut with two models, but plans call for the addition of four more by 2020. That list is expected to include one or more utility vehicles, as well as a sports coupe.

Veteran designer Luc Donckervolke will head the new Genesis luxury brand.

Hyundai showed off one possible addition to the line-up over the summer when it pulled the wraps off the Vision G Concept during the annual Pebble Beach Concours d’Elegance, one of the year’s most exclusive classic car shows. Though larger than the current Genesis sedan, the concept vehicle sported the same Genesis badge that will now be used for the entire luxury brand.

Though a two-door, Hyundai officials told the show car would influence future Hyundai luxury products, including the current top-line model, the Equus sedan. The Equus targets such competitors as the BMW 7-Series and Mercedes-Benz S-Class, while the current Genesis sedan goes after mid-range luxury models like the Mercedes E-Class and BMW 5-Series.

“We’re tickling this idea of expanding our bookshelves in the luxury segment,” Chris Chapman, head of Hyundai’s North American design studio, said in August. He also hinted that the Vision G could influence a future luxury coupe, something Hyundai officials now say they also will add to the Genesis brand line-up.

The Hyundai Vision-G concept could morph into a high-performance luxury coupe.

(Click Here for a closer look at the Genesis Vision G concept.)

Hyundai, whose President and Chief Creative Officer Peter Schreyer used to run Audi’s styling operation, is bringing in Luc Donckerwolke to oversee the new Genesis brand. He has extensive experience in the luxury segment, most recently as chief designer for Bentley.

Going forward, Hyundai will lift a page from its European rivals. It will drop names like Equus for the new brand’s products, avoiding the possibility of having to market a Genesis Genesis sedan. Instead, its models will use alphanumeric designations, such as G80 or G90.

Vice Chairman Chung termed the launch of the luxury brand a “new start” for Hyundai, something fitting for the name, “Genesis.”

Hyundai began studying its options in the luxury market in 2004, and came close to launching a separate brand before scrapping the idea when the first Genesis sedan was launched in 2008. At the time, with the world economy sinking into a deep recession, company officials balked at the potential costs – which they said would run into the billions of dollars. Not only would they have to develop a competitive line-up but they also would have to set up a distribution network and back it with a massive marketing campaign.

The new Genesis brand logo.

At the time, the Hyundai brand itself was struggling to reverse a long-standing image of being a maker of low-quality economy cars. But over the past decade, its reputation has shifted significantly. It now routinely scores among the industry leaders in both initial quality and reliability. Along with sibling Korean brand Kia, Hyundai was one of the stand-outs in the annual Consumer Reports magazine Automotive Reliability study released last month.

(Click Here to see how Hyundai fared in the Consumer Reports study.)

A financial powerhouse and one of the world’s largest automotive brands, Hyundai is now targeting a major industry profit center. Luxury vehicles represent just 10% of global sales, but volumes – and profit margins – have been growing fast.

That said, analysts caution that it will be difficult to take on the established leaders in the luxury segment, German makers Mercedes-Benz, BMW and Audi, as well as Japan’s Lexus.

Future products, like the recently redesigned Genesis sedan will use alphanumeric names.

At the August preview of the Vision G concept, however, Hyundai officials insisted they saw a large niche of buyers looking for alternatives, especially something that offered the same level of luxury features, new technologies and improved customer service – along with the lower prices Hyundai has charged for models like the Genesis sedan.

Whether that proves true is far from certain. The luxury market is filled with second and third-tier players struggling to break out, including Nissan’s Infiniti, Jaguar Land Rover and the two U.S. brands that once dominated the market, General Motors’ Cadillac and Ford’s Lincoln.

Hyundai may see no option but to enter the luxury market. European makers have been gaining ground in the Korean market since it opened up to imports several years ago. That was one of the reasons why Hyundai’s most recent quarterly earnings slid to their lowest level in five years.

But Hyundai has faced other problems lately. Along with Kia, it has been short of the SUV and crossover-utility vehicles that have become the fastest-growing products in the global auto industry. The maker has also been hit by the slowdown in the Chinese automotive market.

And that poses another problem. China is now the second-largest luxury car market in the world, but demand has slipped sharply, hitting the bottom line hard for a number of upscale manufacturers. That could pose a challenge for the launch of the new Genesis brand.

(Former Hyundai US CEO Krafcik now running Google’s autonomous vehicle program. Click Here for more.)

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