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Hyundai Venue's goal: Redefine 'entry level'

LOS ANGELES — One of the toughest decisions by product planners working on the Hyundai Venue was to engineer the subcompact crossover with front-wheel drive only — forgoing claims as an occasional off-road vehicle capable of spinning all four wheels in mud or snow.

And Hyundai could have added all-wheel drive with little effort, given that the Venue is a new global product. "We could have very easily created all-wheel drive for this," said Michael O'Brien, vice president for product, corporate and digital planning at Hyundai Motor America. "We have all the parts. We know how to do it."

But what the planners gave up in awd grip, they gained in carving out a niche of their own.

The Venue is built from the ground up as a stylish urban crossover for the U.S. at the price of a ho-hum economy car — a play that could even convert some used-car shoppers into new-vehicle buyers and bring them into the Hyundai fold.

At its size, it's the first of its kind, but not likely the last, O'Brien said.

"There'll be more automakers coming into this area of the market, I think," O'Brien said. "Our speculation is that the Venue is going to really take off. I think the idea is just right for the market now."

Hyundai's rapidly growing variety of crossovers — the Venue will be its seventh — resembles the once-dizzying array of hatchbacks, sedans and coupes that automakers produced when those were what consumers wanted, said Stephanie Brinley, principal automotive analyst at IHS Markit. At its size, the Venue is an evolution of the entry hatch.

"It's a low-volume product in terms of Hyundai's lineup, but what it does is enables a buyer who wants a new car and wants to stay in that price range a way to get into Hyundai's brand," Brinley said in an interview. "It's an alternative to a lot of things, but it's still small, so its upside potential is limited."

O'Brien said the decision to pass on awd was critical to the larger mission: creating an alternative to entry-level cars on the outs with consumers, and digging down into the market of used-car buyers who really want something new, that looks like an SUV and has modern safety and tech features. About a third of the 40 million used-vehicle transactions last year, he said, started with a buyer looking for a new vehicle and striking out. That's a big target audience for the Venue.

"When you make all-wheel drive, you have to have larger axles and larger hubs and larger suspension components, and all those things cost money," O'Brien said. "The easiest thing for product planners to do is to add. Nobody resists you. 'Oh, add it, add it, add it.' And then you have to pay for it, and then the product becomes difficult to afford," O'Brien said.

Hyundai hasn't set pricing for the Venue, but it could be a surprise. Speculation among the automotive press at the New York auto show put the likely sticker just below that of the Hyundai Kona, which has a base price of $21,035, including shipping. O'Brien told Automotive News the price would be "substantially below Kona" and "at a little bit of a premium but not much" compared with the entry-level Hyundai Accent sedan, which has a base price of $15,915, including shipping. Hyundai will sell the Accent in the U.S. as long as there is demand for it.

"The whole product concept of Venue was built around the idea that a customer could walk into one of our stores and have a choice, and a similar price point, of either an entry car or an entry CUV," he said. "Remember, we're competing against used cars in many cases."

The Venue is also part of Hyundai's bigger strategy in the U.S. of offering crossovers in multiple segments after a long product drought in which it was stuck selling cars in a mostly light-truck market. Hyundai's sales have been rising, thanks to the well-received Kona. Its three-row crossover, the Palisade, goes on sale this summer. The budget Venue and the relatively large and luxurious Palisade are "the bookends" of Hyundai's product strategy, O'Brien said.

Just as the Palisade made a splash last year at the Los Angeles Auto Show, the tiny Venue was surprisingly popular at its debut in New York in blue paint with a white roof and a denim-colored interior that continued the blue-jeans theme.

Every Venue gets an 8-inch infotainment screen with Apple CarPlay and Android Auto. Product planners are betting that the smartphone generation is looking for tech and fuel efficiency more than mechanical prowess. The engine makes just 120 hp.

Hyundai said it was the second-most talked about brand at an auto show that featured a number of mainstream introductions, including Hyundai's new Sonata sedan, and wild concepts. Hyundai's data came from a survey by Prime Research, which has its U.S. headquarters in Ann Arbor, Mich.

Part of the buzz came from its looks: tall and square and 5 inches shorter than the Kona. It may be all car underneath, but the Venue looks like a crossover.

"When people are walking around a parking lot and talking to their friends, and they see that SUV shape, they feel like they are getting a vehicle that's got more space and more versatility," O'Brien said.

"Automatically, that shape provokes something that's going to be a longer-lasting, lower-cost ownership product."

The Venue offers safety features such as standard forward-collision warning, automatic emergency braking and rear cross-traffic alert, which are difficult to find at its price in a new or used vehicle. Buyers can add a sunroof, heated seats, two-tone paint and additional safety equipment that are not universally offered by rivals.

O'Brien knows that the Venue, when it arrives in showrooms this fall, won't be the only entry-level kid on the block.

Hyundai's sibling company, Kia, has long had a runaway hit with the Soul hatchback, now in its third generation, which is an inexpensive surrogate for a crossover. The Soul leads the subcompact car segment; it sold 104,709 units in 2018. The Venue is a natural rival.

"What we do like is the role of [the Soul] in their lineup," O'Brien said. "They're getting those millennial buyers that want something very versatile."

Nissan adapted its Kicks crossover from developing markets to be an entry-level utility vehicle in the U.S., as Ford did with the EcoSport.

O'Brien sees them all, along with the Honda Fit hatchback and economy cars in general, as potential competitors for the Venue.

The wild card is that automakers are still trying to figure out where the consumer will land, with subcompact crossovers coming in a wide range of sizes just like compact crossovers before them. "We really don't know 100 percent," O'Brien said, "how to make those trade-offs."

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