Automakers look to benefit from VW’s woes

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Automakers look to benefit from VW’s woes


Korean and Japanese automakers are pushing their marketing and promotions into high gear to take advantage of the problems surrounding Volkswagen, which is engulfed in a worldwide emissions-rigging scandal.

Hyundai Motor, the leading Korean automaker, is holding a discount event this month, hoping to convert customers who previously drove imported vehicles.

The Korean automaker is offering a 500,000 won ($430) discount on its mid- to high-end vehicles as well as its sports utility vehicles (SUV) to previous owners of imported cars. The cars on discount include the company’s flagship Sonata, Grandeur, Aslan, Genesis and Equus, as well as the Tucson, Santa Fe and Max Cruise SUVs.

For the smaller lineups, which include the Accent, Avante MD, Velsoter and hatchbacks i30 and i40 as well as Genesis Coupe, the discount is smaller, at 300,000 won.


Hyundai Motor is also ramping up its marketing for eco-friendly vehicles by offering 500,000 won discounts for its Sonata and Grandeur hybrid models. The Sonata plug-in hybrid will have a maximum discount of up to 2 million won. They are also selling the premium Equus sedan model, which is expecting a new release in December, at a 10 percent discount.

Hyundai Motor’s affiliate Kia Motors is offering discounts regardless of whether customers have previously owned an imported car. The only condition is that the customer should have driven the same car for more than seven years. The car needs to be registered before November 2008.

Customers will be given as much as 300,000 won when purchasing its small compact models such as the Morning, Ray, Pride or its flagship K3, K5 and K7. Also on the discount list is the Soul and Carens.

Last month, the market share of Hyundai Motor Group, including Kia Motors, was 64.9 percent. This was the first time in nearly nine years the Korean automaker saw its market share drop below 65 percent. The last time it fell below that was in July 2006, when its market share was 62.7 percent.

“It seems like Hyundai Motor Group is not only trying to secure its domestic market share but is also out to eat into the imported vehicle market,” said Ko Kwang-ho, professor at Ajou Motor College. “It’s a marketing strategy that is out to increase market share by increasing the number of customers who will be purchasing gasoline fueled cars and eco-friendly vehicles as they have started to turn their back on German brands, especially the diesel models.”

In recent years, imported brand sales have enjoyed exceptional growth. Among imported brands, German automakers dominated the top share and showed no signs of stopping.

The unexpected growth in demand for diesel cars manufactured by European automakers started to raise concerns at Hyundai Motor. Although its main affiliate Hyundai Motor Group still holds the majority of the overall market share, the growing demand for diesel-fueled passenger cars among young customers became a major concern for the leading Korean automaker.

Diesel passenger cars were permitted by the government in 2005 over environmental issues. In 2010, the market share rose to more than 30 percent, but gasoline cars still held dominance on Korean roads. That changed rapidly in the past five years as German automakers strongly promoted their cutting-edge environmentally friendly diesel cars.

In the first half of this year, diesel cars for the first time accounted for more than 50 percent of the market share, while gasoline cars saw its market share drop to 37 percent. Among the imported cars, diesels held a larger market share of 68.3 percent while gasoline only took up 28 percent.

The automobile that enjoyed the biggest sales in the diesel section among imported brands has been the Volkswagen Tiguan.

Despite the controversy surrounding Volkswagen, the full sales impact is expected to show up after this month, as the news broke around the Chuseok holiday.

According to the Korea Automobile Importers & Distributors Association, sales of imported cars in September saw a 12 percent increase compared to the previous month. German automakers still accounted for 71 percent of all imported brands in Korea.

Other automakers are taking the opportunity to boost sales. Renault Samsung Motor adopted the marketing strategy of providing financial support on fuel.

Customers who purchase their diesel-fueled QM5 SUV will get 1.5 million won in gas station gift certificates. For its small-size SM3 passenger car, the buyer will get between 700,000 and 900,000 won worth of the same gift certificate.

Buyers of the SM5 diesel model will get 700,000 won worth of certificates, and SM7 buyers will receive 500,000 won worth of certificates. For its QM3 SUV, the buyer gets a 800,0000 won discount as a result of the EU-Korea free trade agreement

Japanese automakers, especially Lexus, which experienced a sharp market share drop between 2009 and 2010 after its own quality control problem resulted in massive recalls, are hoping to regain past glory. Prior to the scandal, Lexus competed head to head with BMW for the top spot in Korea’s imported vehicle market.

Japanese automakers until 2008 were neck and neck with German automakers, as they accounted for 35.5 percent of imported cars, while the Germans took up 42 percent. Today, the Germans have a market share in the 70 percent range, while the Japanese continue to struggle with around 10 percent.

Toyota is holding a promotion by offering 3 million won worth of gas station gift certificates to customers who purchase their flagship Prius hybrid model. Buyers of the hybrid car are also offered a no-interest 48-month installment payment plan. The customer, however, has to pay a prepayment of 30 percent of the vehicle’s sale price.

“When including the 1 million won subsidy on eco-friendly vehicles, the maximum 1.4 million won cut on acquisition and registration taxes for hybrid cars, they can get the same effect as getting a maximum 5.4 million won discount,” a Toyota official said.

Toyota’s premium brand Lexus last month introduced the ES series, which comes in two models, gasoline and hybrid.

The official sales tag on the Lexus is between 51.8 million won and 65.4 million won. This is cheaper than its German counterparts, including the BMW 5 series and Mercedes Benz’s E class.

Nissan is offering a 24-month no-interest installment payment plan on its gasoline Altima 2.5 sedan. When customers purchase the same car in cash, they will receive a gas station fuel gift certificate worth 1.2 million won.

The company’s Maxima large sport sedan released on Oct. 1 has a price tag of 43.7 million won. “We have the price competitiveness that can compete with Hyundai Motor’s Grandeur and Aslan and GM Korea’s Impala,” a Nissan official said.

Infiniti is offering a maximum discount of 7 million won for the first 70 customers who purchase their Q70 gasoline sedan. For those who purchase its hybrid Q50S Essence model, the company will guarantee the warranty on the battery for up to 10 years or 200,000 kilometers (124,000 miles).

Honda is offering a 1 million won discount with a free maintenance service coupon that is good for a maximum five years or 100,000 kilometers for customers who purchase its large-size Legend sedan.

While Korean and Japanese automakers are stepping up their marketing, German automakers are keeping a lower profile.

Volkswagen and Audi plan to cut back the discount event of roughly 10 percent that they have been holding. The German cars are also holding off on advertisement of promotional events.

A BMW official said, “There are no promotional plans.”

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