Sixty-one heavily refreshed 2014 Hyundai Equus sedans are currently en-route to the U.S., but Hyundai Motor America President and CEO John Krafcik says that they’re not exactly where he’d like them to be. All of them are on the Morning Spruce, a cargo ship that's stuck near the Kamchatka Peninsula on the far east coast of Russia with a blown motor.
The Equus makes up a small percentage of Hyundai vehicle sales, but there are other models on the ship, which puts a strain on Hyundai’s already-tight supply. “We’re just tapped out from a local production standpoint; we make about 60 to 70 percent of the cars that we sell in the U.S.,” says Krafcik. U.S.-built Hyundai models include the Elantra, Santa Fe and Sonata, and Krafcik says that its Alabama plant is the third-highest-producing plant in the country, churning out more cars than competing General Motors, Ford and Chrysler plants. “We cannot get a single car, which is very frustrating when a boat loses an engine off of the Kamchatka Peninsula.”
While Hyundai is figuring out a way to get its stranded vehicles to the U.S., the automaker brought a pre-production version of the 2014 Equus to our office to showcase some of its capabilities. Krafcik says that the new Equus has a number of updates compared with the 2013 model, including an interior that’s almost completely redesigned. New features include motorized self-closing doors, a 9.2-inch center screen for the infotainment system, a TFT display for vehicle gauges and two rear-seat 9.2-inch displays. “I think when you add all the screen dimensions up we may have more screen than any car in the industry,” says Krafcik. “I’m almost positive of this.”
From a performance standpoint, the Equus’ suspension has also been re-tuned in an effort to provide a ride that’s both sportier and more comfortable. A snow mode for winter driving is also new, along with a smart cruise control system that can bring the Equus to a full stop if necessary. Krafcik says, “You’re going to see that technology trickling down to a lot of our cars in the near future.”
When asked if the Equus’ updates will boost consumer perception of car buyers coming over from luxury brands, Krafcik says that the Equus buyer likes “the idea that it’s not a Mercedes or BMW, but the car still has to pass muster from a feature and content standpoint for them to consider it.” He tells us that Equus buyers are quite similar to the original Lexus buyers from the late 1980’s, and that aside from the Hyundai Genesis, the Lexus LS is the number one trade-in vehicle of Equus buyers (followed closely by the Mercedes-Benz E-Class and S-Class).
Many automotive journalists suspect that a Hyundai badge isn’t prestigious enough to attract a luxury buyer. Hyundai has sold 1,075 Equus models so far this year. In comparison, Mercedes has sold 4,180 S-Class sedans, while BMW has sold 3,209 7-Series models. We asked Krafcik about the advantages of selling a super luxury car from a mainstream brand. “When we thought really deeply and in a really big way about it, the thought was, this is better for the company if our very best cars have Hyundai logos on them, and think of the confidence that inspires in the owner of every Hyundai.”
Hyundai’s CEO says that it’s a challenging time for the automaker. “If the market’s going to grow 10 percent or 15 percent this year, we can’t. We’ll be lucky to grow 5 percent if we can eek out a little bit more production here and there.” Tight supply often means higher prices, but Krafcik says that the automaker has coped with the demand with lower incentives. “It’s not our style to raise prices. It is our style to have a very low incentive level. In fact, for the last couple of years, we’ve had the lowest incentive level in the industry by quite a margin.”
As a result, Krafcik says that Hyundai vehicles now have the second or third highest residual values in the industry. “We talk a lot about transitioning Hyundai from a value brand to a valuable brand. A brand you want because you love the design; yes it has a great value proposition and the car’s also going to have a high asset value in future years.” Hyundai didn’t make Kelley Blue Book’s 2013 list of Best Resale Value Awards. However, TrueCar and ALG ranked Hyundai as having the second-highest residual value across mainstream automotive brands, right behind Honda. Additionally, ALG reports that the Hyundai Azera, Elantra and Santa Fe Sport each offer the best resale value within their respective segments.
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