A luxury car by … Kia?

Feb 21, 2014
The Kia K900.

FORTUNE -- Kia Motor’s new fullsize K900 luxury sedan evokes memories of a January day in 1989 in Detroit when a different Asian automaker, Toyota Motor Corp. (tm), lifted the veils from its first luxury sedan, the LS400.

In those days Detroit and German automakers didn’t take Toyota and its Mercedes S-Class knockoff too seriously. After all, Toyota was a synonym for inexpensive and efficient, not premium. How many self-respecting shoppers would choose Lexus, even at a deep discount to cars with similar features? (Many, many, it turns out.)

Kia, the South Korean affiliate of Hyundai Motor Co., has swiped a page from Toyota’s playbook. But this time, I doubt executives in Detroit, Stuttgart, Wolfsburg, and Tokyo are taking Kia lightly. The K900 drives, looks and feels very much like a BMW 7 Series and, at prices starting at $65,000, sells at about 25% off.

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Oh, yes: The big boys have seen this movie, and they don’t like the ending.

For the moment, Kia isn’t positioning itself as a giant killer. Quite the opposite.

“The K900 isn’t going to be a big volume seller,” said Michael Sprague, Kia’s executive vice president of sales, marketing, and communications. “It’s really about the Kia brand.”

If Kia sells 3,000 K900s, that will be a fine debut, nothing to make Lexus executives lose sleep. The company mainly is hoping that its Optima, Cadenza, Sorento, and other models will benefit from K900’s halo as consumers realize Kia -- a name they don’t know well -- can put a BMW surrogate on the road.

K900 will be sold at Kia dealerships alongside the brand’s less expensive models. At a typical luxury franchise, like Lexus, the dealer is dedicated to dispensing kid-glove service. Toyotas aren’t seen in the vicinity.

Sprague and his colleagues know that to create a true luxury brand -- as opposed to a single luxury model -- takes decades and loads of capital. That’s not the highest priority yet. But just as Samsung started as a cheap alternative to Sony, Kia one day might be seen as premium, justifying further models and perhaps a separate franchise.

Meantime, Kia sold 535,179 vehicles in the U.S. last year, down 4% due to slow launches, compared to 438,134 for Volkswagen. But VW’s average transaction price per vehicle was $26,107, according to Kbb.com, compared with Kia’s $24,161. One of Kia’s key business goals will be to keep raising average transaction prices, which K900 could positively influence.

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Kia’s Super Bowl commercial spoofing The Matrix, starring Lawrence Fishburne, captured strong viewer attention during the game, measurably lifting shopper awareness of the K900.

"K900 meets expectations on a refinement and feature level,” said Karl Brauer, senior analyst for Kelley Blue Book. “Kia knows it will face an uphill battle in getting traditional luxury shoppers to consider its brand; but those that look past the hood emblem will be impressed."

Coming up with a name for the new luxury sedan was tricky. In South Korea it’s known as “K9.” English-speaking societies would mock such a name. Since alphanumerics for luxury cars are all the rage, planners came up with K900.

The K900 designation is a departure for a model line that has names like Optima and Soul. It will be just fine, however, if Kia keeps progressing at its current pace and one day makes a bid for its own luxury franchise.

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