SEOUL, April 2 Hyundai Motor is developing a new luxury sedan for the South Korean market to win back customers who have switched to imported premium auto brands, according to a person with direct knowledge of the matter.
The new model could be on sale as early as later this year, the person said. Codenamed 'AG', the new car will be aimed at more conservative, middle-aged buyers who have been turned off by other Hyundai designs that have targeted younger consumers.
The move reflects growing concern at Hyundai, the world's fifth-biggest auto maker by sales along with affiliate Kia Motors, over its sliding share in the domestic market where it sells 14 percent of its vehicles.
Boosted by import tariff reductions that make their cars cheaper, brands like Germany's Volkswagen, BMW and Mercedes-Benz posted double-digit sales growth in 2013, while Hyundai's sales slipped 4 percent.
The new sedan's arrival comes after Hyundai revamped its mid-sized Sonata and larger Genesis model, also both sedans. It's bidding to recover lost ground in the mid-sized and larger car segment, which accounts for 60 percent of its domestic sales.
The 'AG' will be made on the platform used to build Hyundai's large Grandeur sedan, sold as Azera in the United States, but will be bigger still, the person told Reuters. The person asked not to be named because the plan remains confidential.
The model is aimed at extending Hyundai's line-up of premium cars, the segment where foreign brands are making big inroads in South Korea.
"The 'AG' will fill the gap between the Grandeur and Genesis sedan ... This is a much-needed car for Hyundai to ward off growing competition from imports," the person said.
Hyundai may sell the car in the low-to-mid 40 million won ($37,800) price range, similar to models such as Mercedes-Benz C-Class, Audi A4 and BMW 3 Series, the person said.
"The 'AG' has a more conservative design than the newly introduced Genesis and is largely aimed at appealing to the middle-aged consumer groups, because some of them have been quite discontent with the design of the Grandeur," the person said. The Grandeur's emphasis on sleek styling appealed more younger consumers, the person said.
A Hyundai Motor spokesman declined to comment. Local media reports said the 'AG' will be unveiled at an auto show in the South Korean port city of Busan in late May.
An organizer for the auto show said Hyundai plans to show three new cars, but declined to comment on whether they are brand-new models or face-lifted versions of existing cars.
Along with Japan, South Korea is one of the few markets dominated by domestic carmakers. But Korea has emerged as a new growth market for popular foreign brands in recent years following a series of trade deals that cut import tariffs.
Imported cars had a combined market share of 14 percent in February, up from just 2 percent a decade ago. Executives at foreign auto companies have said their combined market share should grow to around 20 percent in the coming years.
That would be double the share that foreign brands have had in Japan for the past several decades.
Reflecting the potential growth opportunity, top-selling foreign brands are boosting their exhibition space significantly at the Busan auto show, which kicks off on May 30 and is expected to be the largest edition of the show in its 13-year-old history.
Volkswagen has nearly doubled its exhibition space to 1,500 square meters, while Japanese and U.S. carmakers also expanded their exhibition floorspace.
By comparison, Hyundai trimmed its stand to 2,950 square metres from 3,050 square metres last time.
($1 = 1058.6500 Korean won) (Additional reporting by Norihiko Shirouzu in BEIJING; Editing by Kenneth Maxwell)