Germans likely to further tilt axis

German automakers are likely to extend their dominance of the domestic import market as several Japanese brands prepare to pack their bags and leave Korea.

According to data from the Korea Automobile Importers and Distribution Association (Kaida), German automakers sold 78,006 vehicles here during the first 11 months, up 24.8 percent from a year ago.

Their Japanese rivals saw 23.9 percent on-year growth with sales hitting 21,129 units over the same period.

But while the market share held by the Japanese remained more or less unchanged at 17.6 percent, BMW, Mercedes and Audi helped the Germans gain 0.5 percent to own a combined 64.9 percent of the market, slightly reinforcing their dominance in Korea.

“Consumers tend to follow trends because they indicate safety and reliability, so German brands could improve their standing even though I don’t think the market should become too lopsided,” said Na Yun-seok, former product manager for Volkswagen Korea.

Amid high gasoline prices and a growing awareness of the importance of fuel economy in these financially straitened times, more Koreans are turning to diesels, in which German automakers specialize. Last year, only 35.3 percent of foreign cars sold in Korea were diesels, but they now account for 50.9 percent, according to data from Kaida.

“Japanese and U.S. automakers don’t have advanced diesel-engine technology, unlike Europeans, as diesels aren’t popular in their countries,” said Kim Pil-soo, a professor of automotive industry studies at Daelim University College. “German auto brands have also managed to maintain their premium image in the eyes of Korean customers due to clever marketing.”

To step up their challenge, Japanese automakers have been rushing to import vehicles across the Pacific recently as their U.S.-made cars can now benefit from tax breaks offered by the Korea-U.S. free trade agreement, which went into effect this March, thus helping their price competitiveness.

Honda, for example, shipped models from the U.S. for the first time as the No. 3 Japanese automaker released its Odyssey, Pilot, Accord and Crosstour here within a 30-day span.

However, even with the late introduction of U.S.-manufactured models, the Japanese are suffering.

Subaru, owned by Fuji Heavy Industries, announced last week that it will not sell or import any more cars from today, although it will continue to provide after-sales service to owners of its models here.

Subaru Korea, the official importer and distributor, said in a release it made the “heartbreaking decision” to leave as its losses were piling up and a new supply deal with Fuji fell through.

The local unit, launched by KOS Group in association with Subaru in May 2010, offered just three models - the Outback, Forester and Legacy. To benefit from the Korus FTA, the Outback and Legacy were imported from its plant in Indiana.

The company sold 384 vehicles in its first year and 664 in 2011. It almost kept pace this year by selling 558 units as of end of November.

Industry insiders say Mitsubishi will be the next to go as CXC Motors, its official importer and distributor in Korea, has suggested as much in the wake of flagging sales.

Mitsubishi models were imported by MMSK from 2008 but it ended the contract in 2011 due to accumulating losses. CXC Motors, run by Cho Hyun-ho, who is a relative of Hanjin Group Chairman Cho Yang-ho, relaunched the brand this March. However, sales have stayed flat.

From March to November, only 61 Mitsubishi models were sold in Korea. This is the worst record among foreign brands, excluding super premium brands like Rolls-Royce and Maybach, according to data from Kaida. Mitsubishi offered five models in Korea but was unable to sell even a single Pajero, its premium SUV.

CXC staffers denied rumors that the company is abandoning Mitsubishi, saying it is preparing instead to settle the brand in the market on a gradual basis. But critics say it’s just a matter of time before it exits the market.

Shoring up, CXC Motors even introduced its cars to social commerce company Ticket Monster last month, offering discounts of 6 million won ($5,604) from the retail price. Critics claim this was aimed at offloading its remaining inventory.

Moreover, the company does not run any promotional vehicles and also canceled its contract with a local PR agency.

“CXC is keeping its sales network and other services, but it is true that the company is facing a difficult situation,” a person who is close to the company said on condition of anonymity. “I can’t tell if it’s going to shut down its car business, but I know its not as passionate about succeeding in the auto market as its rivals anymore.”

With at least two auto brands likely to vanish, Japan Inc. will have to rely more on the so-called “Big 3,” but only Toyota has so far been showing a strong performance. Japan’s top car manufacturer sold 9,803 units from January to November, more than double its sales last year. It now ranks as the No. 5 brand in Korea’s imported car market.

Nissan saw sales drop 38.6 percent on-year after only 2,096 units were bought here this year until end-November. Sales of its luxury Infiniti brand also sank.

By Joo Kyung-don [kjoo@joongang.co.kr]