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(Yonhap Feature) Economic downturn spurs small car boom in S. Korea

By Kim Boram
SEOUL, Jan. 13 (Yonhap) - Thirty-two-year-old office worker Jeon Mi-hyun drives her Matiz Creative to and from work in Seoul every day. Her last car was a subcompact, but she bought this smaller model about two years ago for several reasons.

   At the time of her purchase, low cost was her highest priority as the country's economy was sluggish and fuel prices were soaring. "I chose this small car to get some benefits and cut down on fuel expenses," she said.

   One of those benefits is the size of the 1.0-liter, low-priced city car, now being sold under the name of the Chevrolet Spark by GM Korea Co. It allows her to easily maneuver through Korea's often narrow and complex maze of roads, and park in small spaces.


GM Korea Co.'s Matiz Creative, the predecessor of the Chevrolet Spark. (Photo courtesy of GM Korea)

Jeon is not alone. Tens of thousands of South Korea's thrifty drivers are increasingly opting for the so-called A-segment cars to capitalize on tax and other breaks, and save on fuel expenses amid a looming economic slowdown.

   "In the poor economic situation, people tend to choose cheaper cars with tax benefits and high fuel efficiency," said Park Hae-ho from GM Korea, the local unit of U.S. General Motors Co.

   Sales records point to their popularity. A record 184,899 units of South Korea's three small car models -- Kia Motor Corp.'s Morning and Ray, and GM Korea's Chevrolet Spark -- were sold in 2011, up 15.1 percent from the previous year.

   The 1.0-liter Morning is the most popular urban car, with 110,482 units sold last year, becoming the second best-selling car in the domestic car market after Hyundai Motor Co.'s mid-size Avante. GM Korea's Chevrolet Spark ranked sixth with sales of 63,763.

   The small-size cars with less than 1.0-liter engines accounted for 12.6 percent of South Korea's entire domestic automobile market last year.

   The biggest appeal of the small cars is the low price. The 1.0-liter Morning and the Chevrolet Spark cost up to 12.5 million won (US$10,800) with full options, far cheaper than the 1.6-liter Avante with a maximum price tag of 18.9 million won.

   When drivers buy a 1.0-liter Spark or Morning, they have to pay 130,000 won in taxes every year.

   In contrast, a tax of 520,000 won will be imposed on a 2.0-liter vehicle. Moreover, if the driver has a luxury 4.5-liter sedan, he or she would have to pay nearly 1.3 million won in taxes every year.

   Fifty-percent discounts for using toll roads and public parking lots are given to the city car drivers, as well as exemptions on acquisition and registration taxes.

   High fuel efficiency is another advantage of small cars amid rising gas prices. Prices of gasoline at the pump jumped 12 percent to 1,916 won as of Saturday last week from last year's average of 1,710 won, according to the state-run Korea National Oil Corp.

   "I need nearly 300,000 won to fill up my car these days. A year ago, the expense was around 230,000 won. It's a huge difference," said Chun Young-ja, 60, who has a plan to change her 2.0-liter vehicle to a smaller one. "I want a more fuel efficient car. The Morning and the Chevrolet Spark are two of my options."

   The Morning has fuel efficiency of 19 kilometers per liter and the Chevrolet Spark has efficiency of 17km per liter, higher than other bigger gasoline sedans and sports utility vehicles (SUV).

   Apart from the economic factors, stylish designs and improved interior space of new small cars has also contributed to the popularity.

Kia Motors Corp.'s Morning (L) and Ray. (Photo courtesy of Kia Motors)

Kia Motors released its new Ray crossover utility vehicle (CUV) in late November. The box-type car with roomy space gained popularity since its launch, as 4,107 units were sold in December alone.

   "The Ray didn't steal the customers of the Morning or GM Korea's Spark. Instead, it created new demand for another type of a small car," said Lee Han-eung from the domestic marketing team at Kia Motors.

   "We think that the increasing demand for urban cars is from those who already have sports utility vehicles (SUVs) or bigger cars. They buy the Ray or Morning as a second-car for their wives or children."

   Lee expects the sale of small cars will continue to grow to some extent in 2012, while the overall domestic car market is forecast to stagnate amid the deepening economic slowdown.

   "It's small and it doesn't offer that much comfort when you drive," said Jeon, who drives the Matiz. "But it's cheap and money-saving, obviously. Also it looks cuter than other big cars."