Foreign-invested carmakers struggle in Korean market

Sandwiched between market leader Hyundai-Kia and fast-rising major import brands, the nation’s three foreign-invested carmakers ― Ssangyong, GM Korea and Renault Samsung ― are suffering a continued slump in sales.

As uncertainties grow over the fate of the three local carmakers, they seem to be mapping out contingency plans such as downsizing their Korean business.

The trio lags far behind Hyundai Motor and Kia Motors in terms of domestic market share. Currently, Hyundai-Kia maintains nearly 81 percent of local market share and their market dominance is stronger when it comes to midsize and large cars.

Other challenges come from brisk domestic sales of major import brands including BMW, Mercedes-Benz, Volkswagen, Toyota and Nissan, some of them releasing cheap compact cars to attract Korean consumers.

Their sales in the fierce Korean market have risen strikingly in recent years. The import car industry saw its car sales reach an all-time high during the first half of the year, posting a monthly average of more than 10,373 units. Korea saw yearly sales of import automobiles surpass 100,000 units for the first time in 2011.

Unlike Hyundai-Kia and foreign brands, GM Korea, Ssangyong and Renault Samsung have suffered a deep slump in sales in the local market.

For the first 10 months of the year, GM Korea, the local unit of U.S. General Motors Co., sold a cumulative 647,185 vehicles, down 3.4 percent from a year ago. Renault Samsung suffered a whopping 64.3 percent drop in sales in September from a year ago.

Some market observers predict one or two of them may eventually scrap their business as a “half-Korean player.”

As a way to boost their sales, Ssangyong Motor among the three appears to have the clearest project as it is seeking to increase synergy with its biggest shareholder, Mahindra & Mahindra Ltd., headquartered in India.

Starting in the fourth quarter, the company started to roll out the Rexton W, a sport utility vehicle, in India. The plant will be in charge of assembling complete knock-down, also called CKD, kits for auto components from factories in Korea.

Indian consumers have increasingly shifted their preference to bigger sedans and SUVs, while small sedans have dominated the country’s vehicle market over the past decade.

“About 500 units of the Rexton W will likely be assembled at the Indian plant per month,” a Ssangyong spokesman said. “With the coming production in India, we will see a 10 percent growth in terms of exports.”

Aside from exports of vehicles produced in its Korean factories, Ssangyong’s Indian assembly lines are likely to play a role in expanding the brand’s presence in two rapidly growing auto markets ― India and Russia ― according to company executives.

Meanwhile, some critics say that Ssangyong lacks the public strategy to boost its sales and brand image in Korea.

GM Korea, which had vowed to narrow the sales gap in the local market with Hyundai Motor and Kia Motors by introducing its Chevrolet brand, recently expressed its willingness toward taking over the remaining stake held by a Korean state-run bank.

GM Korea CEO Sergio Rocha said last week that U.S.-based General Motors is considering regaining complete control of its Korean unit by buying back a 17.02 percent stake owned by the second-largest shareholder Korea Development Bank.

Should the KDB sell its stake to GM, GM Korea would be classified as an import brand’s local unit like BMW Group Korea and Mercedes-Benz Korea.

“Under the scenario, uncertainty will further grow over its future operation and manpower control of factories in Incheon, Gunsan, Boryeong and Changwon,” said an auto industry analyst who wished to remain anonymous.

Renault Samsung Motors has been posting the poorest performance among the three players in car sales at home and abroad.

Its majority shareholder Renault Group, based in Paris, has yet to clarify its stance on whether it will maintain its brand partnership with Samsung Group over the next few years.

Some market insiders forecast that Renault Samsung’s Busan plant may ultimately be used as a logistics base for Japan’s Nissan, which has an alliance with Renault Group.

By Kim Yon-se (kys@heraldcorp.com)