Gary Rome Hyundai

First Drive: 2007 Hyundai Veracruz

The new Veracruz is an impressive, upscale SUV7—but will consumers buy a $40,000 Hyundai?

Up Front
Does the U.S. market really need yet another midsize sport-utility vehicle? And, if it does, is anyone going to pay upwards of $40,000 for a Hyundai?

Those questions were running through my mind as I recently spent a morning test-driving the new '07 Hyundai Veracruz at a press event in upstate New York. The Korean carmaker scored a big hit with its redesigned Santa Fe SUV last year. The Santa Fe is now by far Hyundai's hottest product: U.S. sales doubled, to 27,982 units, during the first four months of this year, and the company expects to sell 90,000 units by yearend.

My guess is that the all-new, bigger, and more expensive Veracruz is going to have a tougher time of it than the Santa Fe did. It's a well-designed midsize sport-utility vehicle with three rows of seats and a seven-passenger capacity, making it ideal for carpooling. And, like the Santa Fe, it has a quiet ride, high-quality interior, and loads of standard features.

But the Veracruz also is coming out just as gasoline prices are soaring and are projected to rise a lot more this summer. And the Veracruz doesn't have any great fuel-efficiency advantage over its main rivals: With front-wheel drive, it gets 18 miles per gallon in the city and 25 on the highway, dropping to 17/24 mpg with all-wheel drive—about the same as the Honda (HMC) Pilot and Toyota (TM) Highlander. My guess is that this summer American consumers will again be turning away from SUVs, and the Hyundai's price advantage won't make up for the fact that it's a new, untested model coming out in a tough market.

The Veracruz is available in three trim levels: the GLS, SE, and Limited, all of them powered by a 3.8 liter, 260-horsepower V8 coupled with a six-speed automatic transmission. The base model GLS is fairly pricey. It starts at $27,000 with front-wheel drive and $28,695 with all-wheel drive. But it also comes loaded with standard equipment, including electronic stability control; traction control; anti-lock brakes with brake assist and electronic brake force distribution; tire pressure monitors; a trip computer; a CD player with steering wheel-mounted audio controls; auto-dimming inside and outside mirrors; a tilting and telescoping steering wheel; active head restraints; front, side, and side curtain airbags; and power windows, doors, and locks. The Veracruz also has excellent crash-test ratings.

The loaded-up Limited version of the Veracruz with all-wheel drive, a power sunroof, rear-seat entertainment system, leather upholstery, and just about every other bell and whistle you can think of, tops out at about $38,000. For the moment, the Veracruz isn't offered with a navigation system, but when that option is added, probably on the '08 model, the price will top out at just under $40,000.

That makes the Veracruz a big move upscale for Hyundai. Indeed, the company figures 40% of sales will be of the expensive, high-end trim level. However, as with other Hyundai models, the Veracruz's main selling point is its relatively low price. Hyundai figures it has a $3,300 price advantage over the 2007 Highlander and a $3,700 edge over the Pilot, once you factor in differences in standard equipment.

Behind the Wheel
For me, the big appeal of the Veracruz is the quality and practicality of its interior. When you hop into a higher-end version of this vehicle, you can't believe it's a Hyundai. The saddle-leather upholstery is soft and well-made, the dash and center stack are tastefully designed, and all the instruments are intuitive to use.

The seats—front and back—are comfortable and supportive. And there's adequate head and leg room in both the front and second-row seats. I test-drove the vehicle with a rangy fellow who was six feet, four inches tall. Up front, he was comfortable (though a little cramped) with the driver's seat all the way back. But even with the driver's seat as far back as possible, he had plenty of knee space in the second-row seat. The only problem I had in the second row was that foot space was a bit tight.

Leg space in the third-row seats, as always, is tight, barely 30 inches. But it's far easier to get into the Veracruz's third row than it is in most SUVs. The second-row seats slide and fold forward, creating room for you to actually get a foothold as you crawl in. Even my lanky co-pilot was able to get in and out with relative ease.

Another thoughtful design touch that comes in handy if you have kids: Like the Toyota Sienna, the Veracruz has a second, convex rearview mirror under the conventional one that allows the driver to survey activity in the entire cabin, including the relatively distant third-row seats, at a glance.

Hyundai has packed the Veracruz's cabin with noise-deadening materials and anti-vibration gear, making it remarkably quiet at every speed. The company says the Veracruz is quieter at idle than the Pilot, Highlander, and even the Lexus RX350. At highway speed (62 mph), Hyundai figures cabin noise is about the same as in the Honda Pilot and slightly less than in the Lexus.

The Veracruz has a lot of hauling capacity, too. The third-row seats fold down flat, and the second-row seats go nearly flat. Maxmium towing capacity is 3,500 lbs., plenty for pulling small boats and trailers. The main downside of the design is that, as with the Santa Fe, there's only minimal luggage space behind the third-row seats. If you were taking a family trip with several kids, you would probably have to buy a roof rack for your luggage.

The vehicle's main disadvantage is that it isn't much fun to drive. The Veracruz has a slightly more powerful engine than the Santa Fe, and its automatic transmission has a manual shifting mode that's supposed to make it seem sporty. But the Veracruz also is several hundred pounds heavier than the Santa Fe, so acceleration is sluggish. The steering feels squishy, and I sensed a fair amount of body roll going around curves. The ride is smooth, and seemed less boat-like than I remember the Santa Fe being, but road feel is minimal.

The bottom line is that this isn't a driver's SUV like, say, the Acura MDX. Like the Santa Fe, the Veracruz has been heavily focus-grouped. And it has the soft, comfortable ride and easy-steer handling that appeals to suburbanites.

Buy It or Bag It?

The Veracruz offers excellent value for your money. But Hyundai is moving upscale a little too fast for my taste. The Veracruz would be more attractive if some of its standard equipment were available as stand-alone options, so shoppers on a budget could get the price down. It's also annoying that on the GLS and SE versions, you can only get a sunroof as part of option packages that cost $2,000 or more.

In this category, you have tons of other models to choose from. In addition to the Pilot and Highlander, the possibilities include the Saturn Outlook, the Mazda CX-9, and the Chrysler Pacifica. Some of the rival models are already being discounted: For instance, General Motors (GM) has slapped a $1,000 rebate on the Outlook, and DaimlerChrysler (DCX) is offering $2,500 or more off on the Pacifica. If gas prices continue to rise this summer, as projected, discount of SUV prices will probably be rife across the board.

If you're on a budget, I would consider buying a Santa Fe instead. The Santa Fe isn't all that much smaller than the Veracruz (only 6.5 inches shorter), and its entry price—around $22,000—is five grand lower than the cheapest version of the Veracruz. Plus, Hyundai is offering $1,000 rebates on the Santa Fe through May 31. If you want a sporty SUV at a budget price, another alternative is the Kia Sorento.

However, if you want a loaded-up, smooth-riding midsize family SUV, it's hard to find one at a better price than the Veracruz. Hyundai's quality ratings have soared in recent years. And if anything goes wrong, you always have the company's wonderful warranty, which includes 10-year/100,000 mile powertrain and a five-year/60,000 mile bumper-to-bumper general protection, plus five years of free roadside assistance, to fall back on. But if the available package at your Hyundai dealer isn't exactly what you want, shop around. It's going to be a buyer's market for SUVs all summer long.

by Thane Peterson

Thane Peterson reviews cars for BusinessWeek.com.