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(Yonhap Feature) Imported car sales on a roll in S. Korea

All Headlines 08:00 August 09, 2012

By Kim Boram

SEOUL, Aug. 9 (Yonhap) -- For decades, foreign-made cars had been deemed a symbol of status and wealth in South Korea, with rich, middle-aged businessmen usually driving expensive luxury sedans like BMW, Mercedes-Benz or Lexus.

For Hwang Ji-eun, however, her Peugeot 307 hatchback is just an ordinary vehicle that helps her go to school with a bunch of textbooks or go on a short trip over the weekend.

"I chose this car because it's spacious and has good fuel efficiency compared with other cars in a similar price range," said Hwang, a 30-year old graduate school student.

"Some of my friends also bought foreign cars because they're not far more expensive than local brands. Moreover, foreign brands have much wider car lineups so I can choose a car exactly I want in terms of price, size, engine type and fuel efficiency."

Hwang and her friends are not alone. A growing number of South Koreans are rushing to drive imported cars in search of lower prices, wider choices and better brand images, fueling a surge in sales of foreign cars here.

In 2011, a total of 105,037 units of imported cars were sold in South Korea, topping the 100,000 level for the first time in 25 years since the first foreign brand car was imported in 1987. Sales of imported cars took up 7.98 percent of the country's entire car market last year.

The uptrend continued in the first six months of 2012, with sales of imported cars jumping 20.5 percent on-year to 62,239 units. For all of 2012, the figure is expected to reach 120,000 with a market share of 10 percent or over.

"Higher prices were the biggest entry barrier for young and not-so-rich drivers to own imported cars," said Yoon Dae-sung, executive managing director of the Korea Automobile Importers & Distributors Association.

"Prices of imported cars have lowered to a large extent and the price gap between foreign and local brands has been narrowed, enabling many customers, especially young drivers, to buy foreign cars."

South Korea's recent free trade deals with the European Union (EU) and the United States also helped pull down the prices of vehicles manufactured in the regions.

European models, on which 10 percent tariffs were imposed before the implementation of the Seoul-Brussels trade pact, will benefit immediate partial tariff cuts and the tariff elimination by 2014.

The price of the Golf GTi, Volkswagen AG's popular model, fell to 42.4 million won (US$37,515)from 43.9 million won after the Korea-EU trade deal took effect in July last year.

With lowered prices, foreign car brands came up with diversified models to satisfy fastidious customers in South Korea, who grumble about the monopolized local automobile market, of which top carmaker Hyundai Motor Co. and its smaller affiliate Kia Motors Corp. control 70 percent.

"Foreign brands have made their efforts to offer a wide variety of cars in terms of design, price, size, engine and other options," said Yoon. "Expanded options have helped to attract young drivers who want to look different."

Volkswagen has five different Golf models and BWM Korea offers eight BMW 5 series cars ranging from 62.6 million won to 114.1 million won with gasoline and diesel engines available. In contrast, Hyundai's flagship Grandeur sedan has only three different sizes of models.

"Hyundai and Kia need rival brands in the domestic market," said Kim Pil-soo, a professor of automotive studies at Daelim University. "Hyundai and Kia cars are more competitive in terms of prices and after-sale services than foreign rivals. Now foreign cars are getting better in prices and their variety is the biggest weapon."

In addition, a foreign car gives its driver other benefits of rarity and distinction. The image of a rich man driving a fancy, sleek Mercedes-Benz sedan has not completely faded away.

"When I go to a restaurant for lunch or dinner with valet parking service, employees seem to treat me more politely than those who drive a Hyundai compact," said Hwang, the graduate student. "This is one major reason that I drive the Peugeot."

Kim said South Koreans' car consumption pattern can be explained as "conspicuous," meaning they want to show off their nice cars.

"People tend to opt for a car to show who they are. So, an image of a brand is very significant factor in buying a car. And a foreign car is the best choice for it."

He said that German cars like BMW and Mercedes-Benz are perfect models to give these images associated with being luxurious, expensive and wealthy.

As a result, four German brands -- BMW, Mercedes-Benz, Audi and Volkswagen -- swept the best-selling brand titles here, with BWM topping the list with 14,512 units sold in the first six months of the year and Mercedes-Benz with 9,807 units.

Still, foreign car drivers complain of poorer after services, higher insurance fees and expensive maintenance costs.

"You should pay at least 2.5-fold or 8.8-fold more for replacing a component. It's too expensive," said Kim. "Foreign car companies should strive to provide better services and reduce prices of auto parts and labor. They should do more after selling a car."


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