Car imports test S Koreans' patriotism

Not so long ago, it was rare to see a foreign-made car on the streets of Seoul, as South Korea built up an auto industry to challenge neighbour Japan, and protected it with high tariffs on imported cars.

Now, increasing numbers of sleek, stylish European, US and Japanese brands ply the capital of Asia's fourth-biggest economy and more Koreans are putting aside patriotism to buy them.

Foreign car sales are still modest - about 5 per cent of the total market - compared to those by local heavyweights Hyundai Motor Co. Ltd. and its affiliate Kia Motors Corp., but they are eating into domestic firms' profits as they usually compete with the higher-margin, higher-end models.

Sales of imported passenger cars grew 26.3 per cent in January-June, at more than double the rate of domestic manufacturers' sales, boosted by aggressive promotions, lower prices, a stronger won and a free trade deal with the United States that will cut car taxes.

Despite smouldering hostility towards Japan, which occupied Korea for much of the first half of the last century, local perceptions are changing and Koreans are warming to the wider range of models on offer as prices fall.

Foreign brands offer a certain cachet.

"It's much easier to attract the attention of girls if you drive a foreign car," said 32-year-old businessman Lee Byoung-hee, who is considering changing his Kia Xtrek minivan to Honda Motor Co.'s popular CR-V sport utility vehicle.

"I'm a bit reluctant to buy the SUV because it's Japanese, but people don't really care where cars are from these days."

Memories are fading since South Korea was colonised by Japan between 1910 and 1945, although many remain sensitive about that occupation and Japan's past military actions in the region.

Until recently, Japanese car dealers had to close their showrooms on holidays such as Independence Day as angry South Koreans demonstrated against Japan, said Park Hun-woo, marketing manager at Honda Cars Huzen, a local dealer for Japan's No.2 automaker.

But Honda's CR-V is now South Korea's top-selling foreign car, ahead of Toyota Motor Corp.'s Lexus ES350 sedan.

Car buyers in South Korea have been pretty much limited to black, white and dark-coloured models. Standing out in the crowd is a clear incentive to look for an imported car.

"I love my G35, it's totally different and I look cooler with it. I'll recommend others buy foreign cars," said Lee Won-ik, 37, who recently bought a silver New Infiniti G35 from Nissan Motor Co..

Prices are under attack as SK Networks Co., which already has a dealership for several foreign brands such as Nissan's Infiniti and Ford's Jaguar, plans to sell imported cars on a parallel grey market at below the official dealer price from as early as the third quarter, a company official said.

"South Korea customers think foreign cars are ridiculously expensive. We will satisfy them with prices removing unnecessary costs," said the official, who asked not to be named.

And the foreign incursion is not just at the high-end.

Earlier this year, DaimlerChrysler's Mercedes-Benz launched the B200, or "My B" compact car, only in South Korea, and has already shifted half this year's sales target, while Volvo introduced its small C30 entry-level car.

In the past, an imported car was flaunted as a symbol of wealth as it was expensive and difficult to find because foreign car dealers focused on luxury brands such as BMW AG .

But middle-class customers are the new target, and traditional price differentials have gone.

Honda, for example, has launched models priced alongside local rivals' cars. The CR-V sells for 30.9 million won ($A38,662)) against Hyundai's flagship Santa Fe SUV, which goes for around 30.7 million won.

Sales of the CR-V jumped more than 150 per cent to 1,870 units in January-June, while Santa Fe sales fell 15 per cent to 21,312.

"About 85 per cent of our customers want to change their Santa Fe or (Hyundai) Grandeur for a CR-V as their first foreign car," Park of Honda Cars Huzen told Reuters in a showroom buzzing with potential customers looking at new cars from Japan.

Imported car sales are seen growing by more than 12 per cent this year to 45,500 units, slowing from last year's 31 per cent growth, and the Korea Automobile Importers & Distributors Association sees the market expanding to 70,000 cars by 2011.

South Koreans have also noticed they are having to pay more for a Korean-made car at home than the same car costs overseas.

Hyundai's Grandeur sells for 35.8 million won ($A44,462) in South Korea, while in the United States, as the Azera, it costs $US24,235. ($A27,886)

"Domestic customers have helped Hyundai and other local automakers become global players, while they have made extraordinary profits from us. How long do we have to feed them?" said Brianna Song, a 32-year-old education worker.

Source: AAP 2007

To comment on this article click here