Imported cars have changed market landscape in Korea

Imported passenger cars have seen tremendous growth in South Korea over the last few years. In 2012 for instance, BMW Korea sold three times more cars than it did in 2009. However, contrary to other markets with similar or even higher growth rates, the total domestic market has been quite stable, with annual sales totaling around 1.2 million units.

Don’t we forget there was a huge backlog with an exceptionally low segment share of imported vehicles of around 3 percent only a few years ago, whereas in many mature markets foreign car brands represent 20 percent or even higher shares? One major reason for this development is obviously the general change of mindset in Korean society. What may have given rise to social discrimination ten years ago is now a symbol of professional success and personal confidence. A premium car is what people dream of, work for and, eventually, buy.

In addition to this, the Korean-based importers have also contributed their part. They have continuously analyzed the local market needs to provide the right products (models, engines, options), streamlined their logistic processes and created a broad and reliable network of retail stores. These stores are typically run by independent businessmen cooperating with the importers at eye level and on the basis of a fair and trustful relationship. Alongside a sound marketing communication strategy, events and public relations, these are the ingredients to preparing a delicious dish. All these local efforts to develop the Korean market potential had to be planned well in advance. Just as it takes several years to develop a new car until it finally comes off the assembly line, it also takes many years to build a robust corporate culture, establish a premium brand in the market, develop reliable wholesale processes and create a powerful dealer network.

Where will the automotive industry move from here? The Korean car manufacturers might face new challenges. Chinese, Indian and Russian cars may hit the market and tap the lower price segments. At the other end of the spectrum we might see the Japanese manufacturers coming back strong if the currency environment continues to provide warm tailwinds. Also, near-premium brands may continue their conquering expedition.

Finally, the premium segment including BMW will continue to launch new models, present new body type niches, and invent new mobility concepts. At the same time, the race is on for new engine technologies, new drive concepts and new communication philosophies. In the future, a car will be much more than just a car. The car retail and sales channel management may undergo some transformations with online sales, individual ordering and other elements adding to the current business model. With all this, customer preferences will change and their purchasing decisions will follow a different pattern. In the past, conquest has been the name of the game but now customer satisfaction will become a key success indicator in the future.

The Korean car manufacturers are perfectly aware of these developments ahead. They will continue to invest in R&D to catch up with high-end engine and underbody technologies to improve performance and fuel efficiency. BMW has been following this strategy path tagged EfficientDynamics for a number of years now and will not easily be outrun in the premium segment. Only a self-reliant and credible technological claim will be able to sustain a strong brand value. Just like a very high customer satisfaction, which, in turn, is based on technical performance and service orientation.

Having said that, it looks like the domestic market could become a testing kitchen where Korean and foreign chefs can compete for the customers’ favor. This way of maneuvering will help the local manufacturers understand the recipes of the foreign chefs and anticipate the flavors that the gourmand out there will order tomorrow. A fair cooking contest will make sure there is enough heat in the oven and pressure in the cooker for the right dishes to be served to please customers worldwide. 

By Hans-Christian Baertels

This is the first in a three-part series of stories contributed by BMW Group Korea. The author is currently CFO at the company in Seoul. ― Ed.