Trucks zoom when economy tanks

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Trucks zoom when economy tanks

Kim Sang-cheol is preparing to open a leather goods store in Jongno District, central Seoul in April. In order move in his inventory, he ordered a Hyundai Motor Porter II truck in December.
The company recently told him the vehicle won’t be delivered until late March because it has such a big backlog of orders. Kim is borrowing trucks from his friends who run similar stores.
“I heard that I might be on a long waiting list for the truck, but I never thought that I’d have to wait for three months,” Kim said. “But since it is a good truck for a person like me running a small business, I decided to wait. I heard that its used car value is also high.”
Hyundai Motor Group considers sales of small trucks like the 1-ton Porter and Kia Motors’ Bongo 3 an important economic index — with a twist. It says orders for the trucks rise when the nation’s economy gets lousy. And orders fall when the economy improves.
These small sized commercial vehicles, whose average price is about 17 million won ($15,521), are generally purchased by self-employed people or small business operators who sell fruits, vegetables or snacks like tteokbokki (rice cakes with red chilli sauce) on the streets. In other words, people who don’t have enough money to lease space in buildings.
It’s not the underclass of the Korean economy, but it is a very modest tier.
According to Hyundai Motor, a total of 95,698 Porters were sold last year, the most among any commercial vehicle in the country, which was a 3.9 percent increase from 2013’s 92,029. Hyundai Motor’s best-selling car in 2014 was its Sonata sedan, with 108,014 units sold.
The sales figure for Porters has been consistently increasing, from 78,846 units sold in 2009 to 94,059 in 2010 and 99,453 in 2011.
It dropped to 87,308 in 2012, but has been increasing since then. The company said more than 19,000 people are on the waiting list for Porters right now.
The situation is similar for Kia Motors’ Bongo pickup truck. A total of 55,107 Bongos were sold in 2014, up 7.1 percent from 51,438 in 2013. The company said it produces 25 Bongos every hour at its Gwangju factory, and it has a waiting list of 3,500 units. It added that it takes about three weeks to be delivered after an order is made.
There are about 500 people on the waiting list for the Labo truck made by General Motors Korea.
“Since the owners are mostly self-employed or small business operators, we are trying our best to hand over vehicles as soon as possible, but the demand is too high,” said a spokesman for Hyundai Motor.
The growing popularity of such trucks is related with the nation’s slumping economy. According to data from Statistics Korea, the population of such independent business people in 2005 was 4.88 million, which rose to 5.2 million in 2008 and hit 5.5 million in 2012. (Data for 2013 and 2014 is not available.)
The problem for these independent business people is that more and more are in trouble financially. According to data provided by the Financial Supervisory Service, the total debt by independents in 2011 was 174.4 trillion won ($159.2 billion) in 2011, but increased by 41.1 trillion won (or 23.6 percent) in the next two years to hit 215.5 trillion won.
Since they are having a hard time financially, many independents ordering a truck choose a manual transmission model, which is 1.12 million cheaper than automatic transmission Porter.
The manual transmission model also offers better fuel economy, providing 10 kilometers per liter of fuel efficiency while the automatic transmission gets 9.2 kilometers per liter.
The popularity of used trucks is extremely high. According to used-car auction market Auto Auction, which is owned by Hyundai Motor Group’s affiliate Hyundai Glovis, the average winning bid for a 2009 edition Porter II was about 7 million until the second quarter of last year. Considering that its new 2015 model’s starting price is 17 million won, its used car price is quite high. The average winning bid for a 2009 edition Bongo 3 was between 5.5 million and 6 million won last year.
“The sellers in the Auto Auction are dealers and they don’t put vehicles on they can’t sell,” said Kang Seong-gon, spokesman of Hyundai Glovis.
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