Hyundai's Veracruz Entices Luxury Market

Hyundai's Veracruz entices luxury market

Model is like Lexus RX350, but thousands of dollars less



Forget the myth. Hyundai Motor is not a tiny South Korean manufacturer of cheap little cars. It is a giant -- the largest car company in South Korea and, as a part of the Hyundai Kia Automotive Group, the sixth-largest car company in the world.

It is a threat to anyone making cars, economy or luxury.

It can topple General Motors. It can upset Toyota. It already has bypassed Nissan and Honda in global vehicle sales. It is as determined as any company to rank No. 1 on the world's automotive stage.

Hyundai has done well rolling out economy cars, wagons and compact sport utility vehicles for budget-minded consumers. It will continue to serve that segment. But there is more money to be made serving the rich -- upper-income professionals who traditionally shop Audi, BMW, Cadillac, Infiniti, Lexus, Lincoln or Mercedes-Benz.

Hyundai wants those upscale dollars and is implementing an audacious, risky strategy to get them. It plans to build better luxury vehicles than any existing competitor and to sell those models at prices below that of any segment rival.

Cheeky? Yes. Possible? Consider the 2007 Hyundai Veracruz Limited crossover utility vehicle, which easily runs against the likes of the excellent Lexus RX350 -- for thousands of dollars less.

I recently did a daylong, head-to-head driving comparison of the Veracruz and RX350 in San Diego and environs. There were obvious differences. The Veracruz, available with all-wheel drive or front-wheel drive, has seating for seven people. The RX350, also available with all-wheel drive or front-wheel drive, has space for five. The Veracruz has more standard equipment -- including some that is usually optional, such as third-row seating -- than the RX350.

In terms of crash-avoidance and impact-mitigation equipment, the Veracruz matches or surpasses all mainstream luxury vehicle manufacturers. For example, electronic stability control, side and head air bags, front-seat active head restraints, rear-seat head restraints, antilock brakes and electronic brake assistance are all standard on the Veracruz.

In design and creature comforts, the Veracruz -- especially the fully loaded Limited edition -- is an undisputed winner. It has a longer, more elegantly sculpted body than the RX350. Inside and out, it simply looks better. Inside, it also feels better -- more spacious, less cramped than the RX350. The leather-covered seats are comfortable. (Thankfully, here, Hyundai jettisoned the notion that all drivers' seats should fit the body as tightly as those in a race car. The Veracruz's seats recognize that many of us are older and that our bodies are slightly larger than they were in our youth.) The Veracruz has every onboard automotive gadget imaginable, except one. At the moment, there is no navigation system. Hyundai has taken some heat for that. And the company is likely to respond by offering onboard navigation as an option in the slightly updated 2008 Veracruz. I understand the concept of the customer always being right. However, in this case, I believe that both Hyundai and its customers are wrong.

Look at the portable, easily attachable navigation systems available at good consumer electronics shops. Most of them are more advanced and more accurate, and have more usable features than the best onboard navigation systems. And the portables, which can be updated more quickly than the fixed onboard models, often sell for half the price.

It thus makes as much sense for car companies to continue installing onboard systems as it does for them to install car phones, which have been surpassed in features, functionality and value by hand-held cell phones. Hyundai needs to save the money it's going to waste installing onboard systems and use it to do something else.

But who am I to talk? Hyundai, as represented by the Veracruz, seems to be doing quite well following its own sense of what's right and what works.

Consider the matter of engineering. The Veracruz comes with an easy-breathing, 260-horsepower, 3.8-liter V6. It uses regular unleaded fuel. The engine is linked to a remarkably smooth six-speed automatic transmission. The comparable RX350 comes with a 3.5-liter, 270-horsepower V6 that requires premium unleaded fuel. That engine is linked to a five-speed automatic transmission. Put another way, the Veracruz is less expensive to operate than the RX350. But it's every bit as much fun to drive.

Still, the problem for Hyundai remains consumer perception. It has to get consumers into the Veracruz to make them believe. That won't be easy to do in the luxury vehicle segment. Prestige is important to luxury bias. Fair or not, for the time being, "Lexus" still sounds better than "Hyundai."

2007 Hyundai Veracruz Limited

Complaint: Hyundai's problem isn't the Veracruz or any of the other eight vehicle lines it sells in the United States. Hyundai's problem is its "we're cheap" image, which hasn't been helped by marketing that emphasizes price more than it does the quality and integrity of its products.

Ride, acceleration and handling: Excellent ride handling. Acceleration is excellent in the flatlands, where the Veracruz easily cruises at highway speeds. But the engine gets a bit wheezy in the mountains.

Head-turning quotients: Many Californians thought the Veracruz came from one of the traditional high-end manufacturers. At least one such spectator, in La Jolla, thought it was the latest edition of the substantially more expensive Mercedes-Benz R-Class crossover.

Body style/layout: The Veracruz is a front-engine midsize luxury crossover utility vehicle (a station wagon, in reality). It has four side doors and a rear lift-gate. It is available with all-wheel drive or front-wheel drive, and it comes in three trim levels -- base GLS, mid-range SE and high-end Limited.

Engine/transmission: The Veracruz comes with a standard 3.8-liter V6 engine that develops 260 horsepower at 6,000 revolutions per minute and 257 foot-pounds of torque at 4,500 rpm. It is linked to a six-speed automatic transmission.

Capacities: There is seating for seven in the Veracruz. Maximum cargo capacity is 87 cubic feet. The fuel tank holds 20.6 gallons of recommended regular unleaded gasoline.

Mileage: I averaged 23 miles per gallon in highway driving.

Safety: Standard equipment includes electronic stability control, front active head restraints, side and head air bags, antilock brakes and electronic brake assistance.

Price: Base price on the Limited with all-wheel drive is $34,005. Dealer's price on base model is $34,909. Price as tested is $37,645, including $2,950 in options and a $690 destination charge. Dealer's price as tested is $34,909. Base price on the comparable Lexus RX350 is $38,000. With comparable options, the RX350 is $43,570. Prices sourced from Hyundai, Lexus, www.cars.com, www.edmunds.com and www.kbb.com.

Purse-strings note: Compare with Lexus RX 350, Honda Pilot, Subaru B9 Tribeca, Nissan Murano and, I think, the GMC Acadia. Competitors had better start taking Hyundai seriously.

Warren Brown, Washington Post
Sunday, April 22, 2007
This article appeared on page J - 5 of the San Francisco Chronicle