Road just gets rougher for Korean carmakers

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Road just gets rougher for Korean carmakers

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In the past three years, Korean automakers have faced a tough challenge from German brands such as Mercedes-Benz, BMW and Volkswagen in the premium sedan market.

And it looks like another test awaits in the market for sport utility vehicles (SUVs) as many foreign brands cars with high fuel efficiency and competitive prices are arriving one after the other.

The two latest SUVs turning the heads of Koreans are the Peugeot 2008 and Nissan Qashqai.

Before Peugeot started selling the new SUV last Thursday, the company received 1,000 preorders, which is about half of the French automaker’s total overall sales this year through September (2,190 units).

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“If we receive an order now, we can hand over the car in January,” said Han Seung-jo, a spokesman for Hanbul Motors, the importer for Peugeot. “We expect to sell more than 7,000 units by the end of next year.”

The most appealing feature of the Peugeot 2008, with a diesel engine with a displacement of 1,560cc and 92 horsepower, is its fuel efficiency of 17.4 kilometers per liter. Neither Hyundai nor Kia has a model that has a fuel efficiency of 17 kilometers per liter (41 miles per gallon). Its base price of 25.6 million won ($23,000) is lower than the 2014 Hyundai Santa Fe, which is offered at 28 million won with the fuel efficiency of 13.8 kilometers per liter.

Another car that is attracting Koreans’ attention is Nissan’s small SUV Qashqai. The company will start selling it Nov. 11 and has already received 600 preorders. Scarier yet for Korean automakers is the fact that the Qashqai was the most popular SUV in Europe in the first half of this year with 110,474 units sold.

The starting price for the Qashqai, which is equipped with a 1.6-liter turbo diesel engine, is 32 million won. Fuel efficiency for the model hasn’t yet been announced, but is expected to exceed 15 kilometers per liter.

“Qashqai, built with a fuel-efficient continuously variable transmission [CVT], targeted SUV buyers who mostly drive in an urban environment,” said a Nissan spokesman.

Other than these two new faces, Volkswagen’s compact SUV Tiguan already has improved its competitiveness in Korea. The German company sold 6,255 units from January to September, the most of any import. The car’s starting price is 38.4 million won and its fuel efficiency is 13.8 kilometers per liter.

Since these fuel-efficient models are offered at reasonable prices, Koreans like 31-year-old Shin Mun-seob, a Gangwon resident, are hopping into an imported car. He drove a 2002 Hyundai Santa Fe, but decided to buy the Peugeot 2008 over Kia’s Sorento.

“The 2008 is smaller than the Sorento, but its price is lower and it’s more fuel efficient,” said Shin.

According to a report released by the Korea Automobile Importers and Distributors Association (Kaida) in October, 53.7 percent of imported cars purchased in the past nine months had engine displacements of 2,000cc or less, up from 15.5 percent in 2004.

Kaida said imported cars were usually considered to be big and unaffordable for many Korean buyers, but many premium import brands, including Mercedes-Benz, have lately been focusing on expanding their market share of smaller cars.

In September, Mercedes-Benz beat BMW in sales for the first time since December 2011, mainly thanks to increased sales volume in its small car segments, including the A-Class and B-Class. The company sold 2,078 small cars in September, nearly double from a year ago.

“We will target more young customers, most of whom are potential buyers of small cars,” said Choi Duk-jun, vice chairman of Mercedes-Benz Korea.

Hyundai and Kia are scrambling to respond to the trend. Hyundai Motor CEO Kim Choong-ho said last week they are considering developing a new compact utility vehicle next year.

BY LEE HYUN-TAEK, KWON SANG-SOO [sakwon80@joongang.co.kr]

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