Korean cars shunned in China over price

Korean cars aren’t being purchased in China because of their lack of competitive edge, not because of ongoing political tension, a Korean research institute said Monday.

The Korea Institute for Industrial Economics & Trade (KIET) said in its latest report that the latest sales drop of Korean cars in the Chinese auto market is largely from the cars’ lack of competitiveness in segments such as price and quality unlike what many believed to be a result of geopolitical conflict between the two countries.

“When the conflict between Korea and China over deploying the U.S. antimissile system gets resolved, the sales will recover to a certain degree, but the low brand awareness and strong local brands will leave Korean cars in a tight place,” the report said.

The institute compared the current situation to what Japan experienced in 2012 when China and Japan were engaged in a territorial dispute over a group of islands known as Senkaku in Japan and Diaoyu in China.

Back then, Chinese consumers boycotted Japanese cars and destroyed and set afire to cars from Japanese brands.

Sales of Japanese cars in China dropped 41.1 percent year-on-year in September 2012 followed by a 58 percent and 37 percent sales drop in October and November compared to the same period in the previous year. Yet sales quickly recovered three months after the conflict, thanks to Japanese automakers’ prompt decision to shift their local strategy from premium to a more affordable and diversified lineup. Toyota launched the new Vios model in October 2013 for about 20,000 yuan ($2,933) less than the model’s old version.

Sales of Korean cars dropped slightly last July and August when Korea and the United States agreed to deploy the Thermal High Altitude Area Defense system in Korea.

Sales in China dropped from 142,000 units in June to 111,000 in July and 124,000 in August. In January, sales again dropped, to 110,000 units, preceding a sharp decline in the following months to 91,000 in February, 72,000 in March, 51,000 in April and 53,000 in May.

The research institute said sales won’t recover as quickly as they did in Japan in 2012 because Chinese carmakers’ competitiveness has been continuously increasing for the past five years, enabling them to launch cars with enhanced safety features and a cheaper price tag.

According to the report, Chinese local brand Chery lowered the price of its 2012 1.6L A3 model from 75,800 yuan in 2012 to 68,900 yuan in 2016.

Yet, Beijing Hyundai inched up the price of its local models. Yuedong, a local name for the small sedan Avante, sold for 99,800 yuan in 2012 but went up to 105,800 yuan in 2016.

“There was a large quality difference gap between Chinese car brands and import brands back in 2012, but the gap has been constantly diminishing” Cho Chul, a KIET researcher said in the report.

“Korean carmakers will have to fortify their local lineup centering on SUV models which are popular in China and launch high-quality cars at relatively low prices since they lag behind in general brand image,” the researcher added.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]