IT WAS not all that long ago that Kia, a Korean carmaker, was best known for building rock-bottom products. The Aspire, a subcompact that the firm built for Ford, its former partner, was derided as the “Perspire” due to its lack of power and amenities. So for many of the folks wandering up to the Kia stand at this year’s Los Angeles Auto Show, the K900 sedan caused more than a bit of confusion.
Kia will launch the sleek and lavishly equipped car (pictured) next year. It is targeting such formidable European competitors as the BMW 5-Series, Audi A6 and Mercedes-Benz S-Class. It is the same segment that Hyundai, another Korean marque, is already going after with its Genesis model. That sedan will push even more up-market when it is redesigned for 2015.
Gone are the days when Korean products could be dismissed as “cheap and cheerful,” says Joe Phillippi, an analyst at AutoTrends Consulting. Since the Hyundai Motor Group bought Kia Motors in 1998, to form what is now the world’s fourth largest carmaker, “they have totally turned the company on its head.”
It is not that the Koreans have abandoned the entry-level market. But they no longer produce stripped-down econoboxes like the Hyundai Aspire of the 1990s, with its bland styling and questionable quality. Even their most basic models, the Hyundai Accent and the Kia Rio, which both cost around $15,000, have recently gone through stylish remakes and offer the sort of performance and features associated with more expensive brands.
In 2006, Kia delivered a shock by hiring Peter Schreyer, a well-regarded German designer, from Audi. He has helped the firm launch eye-catching models such as the Soul, a cross between a hatchback and an SUV, and the Optima, an elegant saloon. Mr Schreyer has since been elevated to serve as one of three presidents overseeing both Kia and Hyundai. It is clear he relishes the idea of challenging the European luxury makers.
Hyundai began its transformation more than a decade ago. But it has a new emphasis on styling. It has adopted a design approach it calls “Fluidic Sculpture”. The results include the current-generation Sonata and the next Genesis, which will be launched in 2015. Such cutting-edge design is a big step for a firm previously content to be what chief designer Casey Hyun calls a “fast-follower”—a euphemism for a copy-cat. And these are far from the limits of Hyundai’s ambitions. The maker began competing with even more exclusive marques, including the BMW 7-Series and Mercedes S-Class, when it launched an American version of its Equus premium-luxury sedan in 2009.
Moon Sik Kwon, Hyundai’s R&D chief, says there are more highline models in the works. He is not ready to discuss specifics, though it would appear they will cover a range of luxury segments, including something between the latest Genesis and the big Equus models. How soon? “Not right away,” teases Mr Kwon. The best guess is a couple of years at least.
There are a variety of reasons why the Koreans are pushing up-market. For one thing, luxury vehicles provide significantly higher margins than budget ones, where there is more competition. There is also the issue of image. The original Genesis helped change the minds of buyers who had long dismissed the Hyundai brand. According to John Krafcik, the boss of Hyundai Motor America, the firm has roughly doubled its awareness level among potential American buyers since it launched the car.
But another factor is weighing on their minds. “Clearly the Koreans have recognised that the Chinese will eventually come in after them—and under them,” says Mr Phillippi. If Chinese makers target the budget models, Koreans may simply be forced to abandon the market segment that gave them their start. Incumbents at the luxury end of the trade will write them off at their peril.
