Automakers gear up for uncertain half

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Automakers gear up for uncertain half


A big upheaval is expected for the nation’s automotive market in the second half as a number of changes have already influenced the car market this year.

The individual consumption tax cut on vehicles expired June 30 and this month the Korean government banned the majority of Audi and Volkswagen branded cars from being sold.

While foreign carmakers are targeting the gap in the market left by Audi and Volkswagen, domestic carmakers are gearing up for fiercer competition as overall car sales dropped after tax cuts expired.

Local carmakers’ major battlefield has been the midsize sedan market, with their flagship models having a good fight against the traditional top model in the sector, Hyundai Motor’s Sonata.

Accumulated sales in the first half of the year still placed Sonata as the winner in the sector. Sales following the tax cut expiration also proved Sonata’s throne to be solid. In July alone, 6,858 Sonatas were sold, vastly ahead of Chevrolet’s Malibu, distributed by GM Korea, which sold 4,618 units.

However, considering 44 percent of the Sonatas sold were liquefied petroleum gas (LPG) models, which mostly are used as taxis, industry insiders say the winner in the sedan market is Malibu.

Renault Samsung Motors’ SM6 remains firmly in third place though sales dropped a bit in July to 4,508 units. It’s still too early to think the product has lost steam. The carmaker released the SM6 diesel model this month and as 52.4 percent of the SM6 cars sold were the car’s higher-end trim SM6 R.E., priced as high as 35 million won, signaling customers are willing to pay more for a loaded sedan.

Hyundai Motor’s sister company Kia Motors’ K5, on the other hand, has been performing poorly even though it’s been less than a year since the second-generation model was released. K5 had the second spot in the sector after Sonata until February, but slipped to fourth in rankings after the SM6 was launched in March and the new Malibu was released in May.

Still, combined market share of Hyundai Motor and Kia Motors reached 66.6 percent in July encompassing all car segments, easing worries that their market share could fall below 65 percent.

For the remaining half of the year, the fate of local automakers will largely depend on the performance of new car releases, industry insiders say.

Hyundai Motor and Kia Motors have a newer generation of cars: the full-size sedan Grandeur, i30 hatchback and compact car Morning scheduled for release. Genesis, a luxe-brand under Hyundai Motor is also preparing to launch G80 Sport, a premium sports sedan introduced at the Busan International Motor Show in June.

Renault Samsung Motors aims to maintain its popularity earned through the SM6 with the release of its sport-utility vehicle QM6 in the second half.

GM Korea will introduce Camaro SS sports car and electric vehicle Volt.

However, despite a number of new releases, it is yet uncertain if the car market can expand as many consumers have delayed car purchases until the first half of next year to benefit from individual consumption tax cuts offered by the government.

“Though new cars are scheduled to be launched, it will be difficult for the domestic auto market to expand due to global economic slowdown and expiration of the tax cut,” said Kim Pil-soo, an automotive engineering professor at Daelim University.

Import car brands also face stiff competition. With aims to grab market share that previously was held by popular German brands Audi and Volkswagen, import car providers, especially Japanese and U.S. automakers that were holding relatively lower portion of the Korean market, are rolling out aggressive promotions.

Japanese brands are offering interest-free installment plans to attract customers. High interest rates of between 5 percent and 7 percent imposed by import brands’ own financial companies have been one of the major customer complaints when buying foreign cars.

Toyota will offer 36-month interest-free installments to customers buying its Avalon full-size sedan in August. Its flagship Camry sedan will be offered at an interest rate of 1 percent on a 24- month installment plan.

Nissan and its luxe brand Infiniti will both offer interest-free plans, a strong swing to the market. Nissan’s full-size sedan Maxima and mid-size Altima will be offered without interest on 24-month payment plans while Infiniti’s Q50S hybrid sedan can be purchased through a 48-month interest- free installment plan.

U.S. based automaker Ford Korea took a leap from its eighth ranking among import cars in June to fourth in July, taking over Volkswagen’s place. It sold 1,008 cars in July, an 11 percent year-on-year increase. Its popularity was backed by sales of the small SUV Escape, which surpassed 3,000 units in the first half of this year. Having fewer diesel vehicles proved advantageous for the U.S. automaker.

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