Embracing New Entries in the Auto Sector, a Pair of Traditional Manufacturers Introduce Their Own Innovations

Despite advancements, uncertainties linger. The focus extends beyond the potential dominance of “mobility” as the future norm, to the practicality of mass-producing such vehicles on a large scale, a challenge even for industry giants like Tesla. Tesla, reputed for its struggles with quality and efficiency in producing the supposedly mass-market Model 3 sedan, serves as a prime example.

Adding to this dynamic startup landscape, two renowned automobile brands have transitioned into this space. Volvo, the 90-year-old Swedish automaker known for safety and dependable family vehicles, has redefined its Polestar performance division as an independent brand. Similarly, Hyundai, recognized for quality entry-level cars since 1968, has taken its Genesis luxury brand in a parallel stand-alone direction.

Both brands cater to the premium segment of the automotive market. While Polestar debuts with the exclusive $155,000 Polestar 1 limited edition, targeting an even more select clientele, Genesis and its lineup initially lean on internal combustion engines but have plans for an eventual shift towards electrification, potentially diving into hydrogen fuel cells. Adopting innovative retail approaches, both brands aim to engage consumers through urban brand centers, limited dealer networks, personalized customer service, and direct-to-consumer sales channels where regulations allow. (Polestar, for instance, mirrors the successful Care by Volvo subscription model in addition to traditional sales and leasing methods.) Brand positioning plays a crucial role, positioning Polestar as a Swedish counterpart to Tesla and Genesis as a Korean answer to Lexus, but having an experienced automaker backing them up is crucial for enduring success.

“In today’s digital age, launching a new car brand and shaping its identity is feasible,” like Thomas Ingenlath, Volvo’s chief design officer and Polestar’s CEO mentions at the temporary Polestar offices within the Volvo headquarters in Gothenburg, Sweden. The standalone Polestar facility is set to open this autumn.

“Establishing an online presence with an aesthetic website is attainable with digital agencies,” Ingenlath notes, “and with EVs, technology hurdles might be less daunting than those faced with traditional combustion engines. While developing the car might not pose the greatest obstacle, challenges emerge in production, distribution, and establishing a robust service network,” he elaborates.

Making the most of the parent company’s resources is pivotal for the brands’ launch strategies. While a compelling product may attract consumers initially, the physical production of a vehicle entails significant infrastructure investments and thorough knowledge of the manufacturing process.

“We have access to cutting-edge technologies and a competitive organizational structure,” states Luc Donckerwolke, Genesis and Hyundai’s head of design, outside the Genesis design studios in Seoul, Korea. The integration within the Hyundai Motor Group’s supply chain empowers Genesis, offering an unmatched advantage in producing various components like steel, lamps, seats, screens, and more.

Access to specialized expertise and operational efficiencies elucidate the rationale behind Polestar basing its debut model, the Polestar 1, on a modified Scalable Product Architecture (SPA) shared with Volvo’s S90 and XC90 models. Similarly, the G70, Genesis’ premier stand-alone model, shares a platform with another Hyundai Motor Group counterpart, the Kia Stinger.

Both Polestar and Genesis aim to establish dedicated retail networks—featuring tailored sales teams, distinct showroom aesthetics, and product specialists—while collaborating on vehicle service facilities and supportive administrative functions.

In essence, anything not apparent to the consumer is up for cost-sharing, as mentioned by Manfred Fitzgerald, Genesis’s global brand leader. “However, it is crucial for us to have a clear differentiation at the customer touchpoint,” he emphasizes.

Despite sharing vehicle foundations and service functions, establishing a sub-brand is a significantly costly endeavor. This is especially true in an automobile market influenced by rapidly changing consumer trends, petroleum alliances, and the current unpredictable U.S. president amidst a global trade conflict. General Motors faced this with Hummer, Toyota with Scion, and even the esteemed Mercedes-Benz with its initial revival of the Maybach brand.

This explains the current inclination towards giving specific divisions within a primary brand equal prominence on the emblem, similar to Mercedes-Benz’s approach with the Maybach luxury group and AMG performance division, featuring vehicles designated as Mercedes-Maybach and Mercedes-AMG respectively. This strategy not only minimizes the necessity for separate physical, marketing, and retail development but also elevates the primary brand; AMG’s reputation for speed and performance, as well as Maybach’s luxury credentials, all reflect positively on Mercedes-Benz, generating a halo effect around the core brand’s standard products.

Nevertheless, the appeal of creating a new identity persists. This is partly driven by a desire to break away from the limitations of a traditional automaker’s legacy—reaching out to customers who may not have been drawn to the essence of the core brand.

“Our brand philosophy is ‘Pure, Progressive Performance,’” states Tim Heldmann, Polestar’s vice president of global marketing and brand management. “It blends elements from Tesla, focusing on ‘pure,’ and Porsche, known for its performance-centric approach.” It’s improbable that a long-time Volvo customer would associate the brand with Tesla or Porsche—and that’s precisely the intention.

“Volvo has a foundation in safety, in delivering a car that is universally appealing. It’s inclusive, bringing everyone on board,” explains Ingenlath. “Opting for a brand like Polestar allows us to introduce something more daring, more individualistic, something that may evoke mixed reactions. This grants us the freedom to create a more cutting-edge design.”

Donckerwolke from Genesis echoes a similar sentiment.

“Another luxury brand is not essential,” he remarks. “Therefore, we have the opportunity to explore something distinctive in refinement, in the harmony of materials and elements. We can strive for something without the baggage that other brands carry due to their traditions.”

But despite substantial corporate, financial, and institutional backing, launching a sub-brand can present unexpected hurdles. This becomes particularly challenging when the foundational characteristics of the new brand contradict those of the core brand.

Volvo, much like Swedish society, focuses on collaboration and the greater good. Conversely, Polestar is unapologetically centered on the driver—more rebellious, more individualistic. Ingenlath admits such thinking is not instilled within Volvo’s upper management. However, he acknowledges the unwavering support of Volvo CEO Hakan Samuelsson.

“Many people adore the brand and embrace it,” Ingenlath remarks. “Yet, often in life, you admire and love something that is different from you, and that is partly the reason.”

Fitzgerald and Donckerwolke suggest that Korean culture traditionally values modesty, conformity, and the flawless execution of existing ideas. However, one of the core principles of Genesis is “audacity”—a stark contrast to Hyundai’s long-standing beliefs. Fitzgerald describes it as “a shift in parameters… in terms of understanding the customer, approaches to tasks, and catering to an entirely new and challenging segment.”

Embracing a fresh mindset can bring advantages regardless of the eventual success of the sub-brand. It may compel the main brand to explore new technologies, capabilities, materials, or retail concepts. This exploration typically occurs within a specialized domain, potentially reaching a different consumer base, and without the need for widespread approval. A sub-brand can serve as a practical test environment, allowing valuable insights to be integrated back into the parent brand.

“Regarding technology, we position ourselves as the guiding star, embodying a premium stance that leads the way,” explained Heldmann from Polestar. “Essentially, new technologies introduced by Polestar will eventually be adopted by the entire group. This allows us to showcase our technological leadership while also serving as a trial before wider implementation by Volvo.”

Fitzgerald expresses a similar sentiment, albeit in a slightly different manner, particularly in the context of Hyundai and Genesis. “Hyundai Motor Group has a history of delivering exceptional products quickly and of high quality, following specific principles and catering to mainstream consumer needs,” he explained. “However, as a premium luxury brand, there is a different expectation to pioneer and lead, representing a distinct mindset.”

The establishment of Genesis and Polestar can also be interpreted as efforts to elevate both core brands. This is why the brands are not entirely separate entities. Volvo’s performance vehicles will carry the “Engineered by Polestar” badge, indicating that the upscale brand has refined Volvo’s engine, chassis, and dynamic tuning to enhance the core Volvo product’s appeal and create a connection between the brands.

This initiative is not solely for the sake of prestige: successful sales of high-end Polestar vehicles could influence Volvo models to command higher prices and, consequently, larger profit margins. This goal is a key focus for Volvo and has been since the brand’s relaunch under new ownership by the Chinese company Geely.

“Our objective with Polestar is for Volvo to enhance its premium status,” added Heldmann. “Thus, we aim to elevate both brands simultaneously.”

Naturally, not all of these experiments will be successful, nor is that the expectation. Yet, this aspect adds value to such endeavors as it helps establish unique identities for their parent brands, even if not all initiatives gain traction. Polestar’s focus on driver-centric sportiness and elegant Scandinavian aesthetics, along with Genesis’s emphasis on luxurious features and hydrogen-fueled SUVs, embody the distinct aspirations of Volvo and Hyundai. Moreover, as per an industry insider desiring anonymity, any learnings from launching Polestar, even if the sub-brand discontinues, will likely benefit Volvo.

“Out of ten endeavors, one or two may not yield the desired results,” Ingenlath commented. “That’s an aspect we must acknowledge.”