Here’s one of the first test drives of the all new Hyundai Genesis sedan by a Westerner, a writer from Automobile News for all you guys that just might have an extra $30k to $40k (or million won) lying around. Joe DeMatio spent a few days at Hyundai’s test track in Namyang putting the Genesis through its paces. The verdict?
My heart rate was certainly above its normal level as I circled Hyundai’s test track at 150 mph in a Genesis equipped with Hyundai’s advanced new 375-hp, 4.6-liter V-8 engine. The big sedan was composed, predictable, and vigorous as the high banks dumped us onto the long straights and the scenery blurred. Yes, I was driving a Hyundai. What is this world coming to?
Net net: German-like styling from the front, Japanese-like “Infiniti M Class” type styling in the back. Performance wise, very Lexus like, but a little short on the intuitive driving experience of the Bavarian wunderwagen (the BMW 5 series). Overall, thumbs-up.
Now, if only Hyundai can get their internal house in order…
23 Comments
Sounds like the perfect car for those of us who paid 25 cents for our first gallon of gas, and knew we could drive the two-lane, sagebrush-lined routes of the American west at 150 mph for an hour and rarely have to slow down for curves or other traffic.
Today, the owner of such a car should have to pay $10/liter for fuel plus an hourly rate in use fees for the public thoroughfares, and even then, the bystanders will be flipping him/her off.
That, coupled with the obvious vandal-magnet qualities, should make it an excellent first choice ride for anyone who likes to trade in a new model every year while sending 5 oil executive’s kids to the Ivy League. Ah, 4.5 liters, for the discerning motorist who simply doesn’t give a shit for anything or anyone but himself.
Exactly.
How well will this Hyundai drive when the foretasted gas prices in the states reach the 7-8 dollar/gallon range.
I would hope Hyundai is working on something that is more for the future because this is already looking like the past.
Darn . . . instead of “foretasted”, it should be forecasted.
I often wonder why the Korean car companies don’t start rolling out luxurious compact and small cars like the matiz/atoz/tico. Bah!
Does it really matter if the car sells overseas. Enough Koreans will buy it, hell they buy the ugly as hell Equus and Chairman.
Considering the price in Korea is $20,000 higher than the price in the US AND they can make money on the car in the US, it’s a no lose proposition.
The Captive Protected Nationalistic Korean market prepared to pay through the nose, probably allows for costs to be covered.
What did the world need more from Hyundai, a Korean Mercedes, or a decent, affordable hybrid?
My guess is the kind of people who buy BMWs or Lexuses won’t buy this car simply because it’s a Hyundai, great leaps forward in quality notwithstanding.
Hyundai is wasting its time chasing this shrinking market. Austin has it right - most of the people who will drive this car will do so because they live in Korea, not exactly a free market. Incidentally, I’ve noticed while living in several oil-producing Asian countries that Korean expatriates wouldn’t be caught dead in Korean cars once out of the motherland. It’s Toyota and Honda for them.
Give me a hybrid based on the Elantra - something they’re belatedly working on, apparently, and which would draw on Hyundai’s strengths - instead of this foolishness.
“Give me a hybrid based on the Elantra - something they’re belatedly working on…”
I agree. Hyundai got caught a little flat footed on the whole hybrid thing. The Elantra hybrid will be coming out in 2009.
Disagree w/the comments on if there will be a market for the Genesis in the states. Sales, in my opinion, will start slow, but I think this car will help improve perceptions. Besides, people will always want to buy lux or near lux cars in the future, provided oil prices have some semblance of stability. If you are a car manufacturer, this is where you want to be because that’s where the higher margins are at. This is gearing to take market share not so much from those that would by a BMW but those who want to upgrade from a Camry to a Lexus or a Chrysler 300 or Buick. All the upper end cars from the major badges are the target, not Mercedes or BMW.
I’m sure the Genesis is a nice enough car, as Hyundai has been making astronomical leaps in the quality of their vehicles. Buy they’re a day late and a dollar short with regard to the market.
Anything that gets less than 20 mpg is selling like hotcakes topped with diarrhea syrup in the current climate. You generally count on a 15-20% hit in value when you drive off the lot, but these kind of gas hogs are taking a 50-75% hit.
Car lots are filled with rows and rows of large SUVs and V8s collecting dust. You ought to see the looks on the faces of Tahoe and Escalade owners when they try to trade in their beast and get offered 25% of Blue Book, and that’s if they’re lucky. A lot of dealerships simply won’t accept any more guzzlers for trade because they’re usually on an upside down loan, and so you end up paying them –a lot — just to take it off your hands.
“So what’s my 2007 Ford Expedition worth?”
“Let’s see…you paid $40,000 for it last year…you owe $35,000 on the loan…and it’s worth $15,000…so your trade-in value is -$20,000. Congratulations!”
The good news is, you can get a used Hummer for a couple cases of Keystone Light. They all come with “SMLPENIS” vanity plates as well.
the prius is the hottest car around these days. that’s the opportunity segment.
Fun with financial statements:
from 2003 to 2006, Hyundai Motors consolidated sales rose from $53bil to $70bil. Their profit margins held steady at under 4%, until the final year, when they fell to below 2%. When a (Korean) company that large reports margins like that, I assume they’re cooking it to give an impression of profitability.
Where might I find some evidence of that? Hm. Well, the company reports $70billion in assets, $50 billion of which is debt, and of that $50, $30 billion is short-term (must be paid back within 1 year). What is the price of money these days? Depends on your credit rating, but say anywhere from 5% to 15% for big businesses.
And yet, on all that debt, Hyundai year after year reports paying almost no interest. For 2006 they paid $250mil in interest. On their total debt that’s about half of one percent. Nobody would lend money to Hyundai at that rate, except maybe the Korean government, or other Hyundai affiliates, who don’t demand to be paid back.
In sum: they aren’t profitable, they’re hostages to their unions, who have gone on strike every year for the past 16 years, they pass on their increased labor costs by demanding retroactive price reductions from their (domestic) suppliers, they keep adding debt that they can’t pay back, probably stashing the interest expense as a long-term liability to government-controlled banks. If they actually had to pay a real-world interest cost on their debt, the interest payments would send them into the red.
Hyundai is a public works project, underwritten by the Korean government in the interest of providing employment and having a proud national industry.
Yes, I’m very critical of their bottom line - I simply don’t believe it. Still, their top line is $70 billion in sales. They bring in a lot of cash. If they could just manage it properly, they could be a real contender.
If you don’t like it, go home Link’d. Oh, you are home! Well you should mind your own business then! Of course I’m joking.
All sarcasm and joking aside, 40 grand for a Hyundai?! I’d rather by a real car like a Honda, Toyota, BMW, Chev or Skoda. Anything but a Korean car. I feel dirty just typing Korean and car in the same sentence!
JohnT - Korean cars are real cars. The knock against them is grounded in ancient history rather than reality.
Their problem is that the world is full of people who have experienced a lifetime of Letterman Hyundai jokes and distant memories of the Pony.
The guy who spends a huge pile of money on a status-driven luxury car wants to show off to his neighbours his Lexus or his BMW. A Hyundai won’t ever have the same cache, regardless of how good it is.
Cars aren’t just cars. Here’s a mental exercise. Let’s imagine a generous government purchased a BMW for every driver with an income below $25,000/year. There’d be BMWs everywhere, in the parking lots of working class homes, factories, and driven by lower-income pizza delivery guys… The cars would still be the “ultimate driving machines” they always were, but now a dime a dozen and in the hands of the masses. If this happened, do you think the affluent people who always drove BMWs would be more or less likely to continue driving them?
I’d rather buy a Hyundai then a Chevy or a Ford. I feel dirty typing Detroit and car in the same sentence.
Link’d,
How do you (or Hyundai) count debt as an asset? Regarding short term debt, it theoretically has the best interest rates so that’s why companies get it. As long as financiers keep refinancing the short term debt you’re okay. I haven’t analyzed Hyundai’s financials (are they even GAAP standard?) myself, but since hearing your summary… maybe I should. Sounds fishy. Do they publish 10k’s? Maybe short term debt is all they can get from non-Korean lenders because they are not GAAP standard?
To me, internal financials (the stuff that the managers need to look at, not shareholders) are like girls. You can say how great of a personality a girl has all you want, but what you grabs your attention is a nice face, a rack and body. A company with mediocre financials but nice products is like a girl with a great personality. Okay, all well and good but you wouldn’t want to show her off to your friends. A company with great operating margins, growing sales, a debt to asset ratio is that hot blond (not that I’m personally into blonds) that all the guys want to fu*k.
???
I’m a little surprised to be explaining this, but:
$70bil in assets = $30bil in current debt + $20bil in long-term debt + $20bil in equity, half of which is retained earnings. A=L+E, of course debt is an asset.
As for the rest of it, yes, your IB perspective is clear and refreshing. BTW, Hyundai is not among the Korean companies with GDRs on the NYSE. Their Korean GAAP accounts are remarkably thorough for Korea, though, and available at Hyundai-motor.com.
Anyway, looks like there’s lots of action in other threads, I’ll go see what’s bothering Jeffrey Jones.
“I’d rather by a real car like a Honda, Toyota, BMW, Chev or Skoda.”
Notice he doesn’t mention Ford, GM, Chrysler - all of which have junk bond status, and nobody in the world wants to buy, therefor facing liquidation that would throw incredible painful economic and social turmoil in North America. All those Hyundai jokes… guess who got the last laugh? It’s funny alright.
I’m no genius at accounting BUT isn’t short term debt meant to finance short term assets, and long term debt, long term assets.
One thing Hyundai does do well is that it makes cars that people actually want, economical runarounds. Think of the biggest selling cars in the world.
VW Beatle, Morris Minor, Leyland Mini, all economical and mega millions sold.
“All sarcasm and joking aside,”
Right,
“40 grand for a Hyundai?! I’d rather by a real car like a Honda, Toyota, BMW, Chev or Skoda. Anything but a Korean car.”
…
First of all… what the hell is a Skoda?
Second, I would like to argue that Hyundai car’s quality has drastically improved since the 70’s, but I fear talking to a wall may prove more productive.
“I feel dirty just typing Korean and car in the same sentence!”
Lol… so, whenever you see a Korean driving a car, you can’t describe the scene without feeling dirty? It must be hell for you if you’re living in Korea. “I say, that gentleman of Asian descent is driving an automobile with a fine looking lass in his arm.”
I drive a 2007 Hyundai Elantra. Pretty good mileage, good driving experience, and doesn’t gives me any trouble. And it’s a real car too, believe it or not. I know, I was shocked too.
Don’t know anything about Hyundai’s financial status, but I do see alot of those cars on the street to believe they would make some profit.
# 14,
Huh? Perhaps we have our terminology mixed up? I was speaking in terms of net assets, which are total assets MINUS total liabilities. Liabilities include debt, both short and long term. Private company analysis is my area, and in my world, we care more about net assets and how debt (all forms) influences your ability to leverage the company up w/financing.
That’s it then. As per the balance sheet equation A=L+E, what you call ‘net assets’ I call ‘total equity’, or with some minor modifications, book value.
Apologies to all non-geeks who clicked over to read these last 2 comments. WangKon and I having a ‘boot or trunk? / elevator of lift?’ moment.
Hey… who you call’in a geek?…
#17,
Škoda is a Czech automotive company that was purchased by Volkswagen back in 1991. They’ve participated in the World Rally Championship with the Fabia and I believe the Octavia is also used by the (some?) UK police. Two years ago they also produced a mini MPV, although some models (i.e., the Superb) look like they were copied straight from the VW assembly lines.
As for the debt and interset thing, I think it’s because of the captive finance companies. The debts of the finance companies are consolidated in the balance sheet but the interest cost of those debts is recorded as operating cost rather than interest cost in income statement. So, you should compare the automotive segment debt to the interest cost.