Japanese automakers struggle in Korean market

Imported car brands with large deficits aim to hit back with lower prices and model revamps


Japanese carmakers have seen gradual recoveries in the global market, but their Korean businesses are still posting large operating losses.

The automakers attributed their large deficits to external factors such as last year’s earthquake and tsunami in Japan, floods in Thailand and the strong yen.
“Last year was doomed to deficit. The earthquake and other natural disasters basically blocked the automobile company from sales. Then was then … but we believe that we will be able to continue and make positive progress,” a Toyota Korea spokesman said.

Toyota Korea acknowledged that the company is left with a 32.9 billion won ($28.6 million) operating loss after 391.4 billion won in sales in the fiscal year from March 2011 to March 2012. The figure increased by about 253 percent from a year earlier.

The leading Japanese carmaker saw sales drop by about 8 percent, whereas the entire Korean imported car market grew by about 21 percent in the first half of the fiscal year.

“The imported car market was not so big in size then, when Lexus sold the most in 2007. We sold 7,520 cars throughout the year,” said a Toyota Korea official who asked to remain anonymous. “Now there are many imported car companies that sell over 100,000.

“The Lexus models currently being sold in Korea were mostly introduced back in 2007… these models are too old and, besides, we went through a lot last year after all,” the source said.

Toyota Korea added a new sports sedan, the New GS, to the Lexus lineup on March 12, to make up in second-half sales. The company also plans to launch the gasoline-powered ES350 and ES300h Hybrids in September at the earliest.

Followed by its bestselling model Camry 2012 in the first half, the company aims to promote the Lexus brand in the second half as its major product.

Reports show that Nissan Korea and Honda Korea did not escape heavy operating losses either. Nissan Korea ended up with an even greater operating deficit, 34.6 billion won, accounting for about one-quarter of its 138.4 billion won in sales.

Comparing the 2010 and 2011 fiscal years, Nissan Korea’s year-on-year sales fell by about 44 percent and its operating loss soared by about 63 percent.

Another source said that Nissan Korea reaped about 9.1 billion won in surplus during the 2007 “golden age,” but the yen began to rise in 2008, causing the ever-growing deficit. Starting from 44.2 billion won in 2008, the accumulative operating loss rose to 120 billion won over the past four years, which is almost equal to total sales last year.

“The earthquake and strong yen led to the drop (in market share and sales),” said a spokeswoman for Nissan Korea.

Regarding the continued German dominance of the Korean imported car market, the spokeswoman denied that the nationality of a car brand is significant.

Honda Korea increased sales in the first half by about 13 percent. Considering the 21 percent growth in the Korean imported car market, however, the company is still struggling, according to a news report.

Honda Korea first entered the Korean imported car market in 2003 with motorcycles and introduced four-wheeled vehicles from 2004. The company’s market share in Korea was highest in 2007 at 13 percent, which fell with the rise of yen in 2008 just like most of the other Japanese auto brands.

In addition to the Japanese earthquake and strong yen, Honda Korea suffered losses from the floods in Thailand in 2011, which swamped more than two-thirds of the country and shut down hundreds of factories.

“We have manufacturing plants for two-wheeled and four-wheeled vehicles in Thailand. (The Thai flood) caused a lot of difficulties and (negative) impact on the production level,” said a spokeswoman for Honda Korea.

Honda Korea is seeking to raise sales through promotion campaigns that change every month. In July, the company is offering a maximum 5 million won discount to those who purchase its bestselling midsized sedan, Accord.

Subaru marked a .3 billion won operating loss over the past two years with a 19 percent drop in sales. CXC Motors, the official distributor of Mitsubishi, sold 22 cars in the first half, more than half of which are turned out to be purchased by its employees, a news report said.

By Chung Joo-won (joowonc@heraldcorp.com)