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(News Focus) Advances by small carmakers to offer more value for money to S. Korean consumers

2016/12/02 11:02

By Byun Duk-kun

SEOUL, Dec. 2 (Yonhap) -- South Korea's auto market is set to witness one of the most significant and dramatic changes in years, but one that may greatly benefit local consumers, market observers said Friday.

Ironically, however, such a dramatic and yet positive change will come from a relative retreat by two of the largest carmakers here -- Hyundai Motor Co. and its smaller affiliate Kia Motors Corp.

Together, Hyundai and Kia form Hyundai Motor Group, the world's fifth-largest automotive giant by sales.

They have long dominated, if not monopolized, the local market since Hyundai Motor took over then-defunct Kia Motors in 1998.

Their combined domestic market share has remained closer to 80 percent than 70 percent, while their combined global sales have shot up to over 8 million cars.

This year, however, the two automakers' domestic market share is well expected to drop below the 70 percent mark for the second time in their joint history.

In the first 10 months of the year, their combined market share here came to 65.5 percent, while their market share in October alone came to 58.9 percent, marking the first time in their history that their market share has dropped to below 60 percent.

Such a drop has been attributed to prolonged labor disputes at the companies' production facilities.

Unionized workers of Hyundai and Kia each held over 20 rounds of strikes this year, together causing some 5.2 trillion won (US$4.46 billion) in missed production, approximately 249,000 cars worth, for the two carmakers.

They are apparently seeking to re-solidify their market dominance, planning to launch seven new vehicles here next year in one of the most aggressive launch schedules.

Many, however, believe the companies' regaining control of the local market may do more harm than good, especially for local customers.

"The near monopoly by Hyundai and Kia causes price hikes, and in such market conditions, customers are bound to be left with fewer options," a market observer said, while speaking on the condition of anonymity.

"Excessive leadership by any single company tends to cause a decline in the overall quality, performance and design of products available in the given market, while the lack of true competition may also prompt others in the same industry to invest less," he added. "Such a market structure will not benefit any, especially the consumers."

   In fact, both Hyundai and Kia have long been accused of selling their cars at higher prices here than in overseas markets, though they have strongly dismissed the accusation, claiming the price difference comes from different sets of features and equipment put in vehicles sold here and abroad.

Still, smaller carmakers are now bringing competition in force, possibly for the first time.

The 2017 Chevrolet Spark (Photo courtesy of GM Korea) The 2017 Chevrolet Spark (Photo courtesy of GM Korea)

GM Korea Co., the South Korean unit of U.S. automaker General Motors Co., saw its domestic sales jump 15.6 percent on-year to 161,962 cars in the first 11 months of the year, accounting for 11.4 percent of cars sold by the top five automakers here.

Such a sharp increase comes amid the apparent retreat by Hyundai and Kia, but the rise has mostly been attributed to the launch of two new vehicles -- the Chevrolet Spark minicar and the new Chevrolet Malibu midsize sedan -- both of which have remained one of the best-selling cars in their segments.

Also in terms of all vehicles sold in South Korea this year, including commercial trucks and imported vehicles, GM Korea's market share is expected to breach the 10 percent mark for the first time since 2007.

As of end-October, the company's overall market share stood at 9.8 percent, but its monthly figures have been on a steady rise from 10.3 percent in August to 10.9 percent in September, and again to 11.3 percent in October.

"A double-digit market share is important in that it will show us and others like us here the possibility of growth, and that local customers will purchase vehicles based on their quality and competitiveness instead of just the name they carry," a GM Korea official has said.

Ssangyong Motor Co., the South Korean unit of Indian carmaker Mahindra & Mahindra Ltd., also had its domestic sales grow 5.1 percent in the January-November period, with its exports spiking 12.4 percent on-year to 46,195 cars.

Domestic sales by Renault Samsung Motors Co., the local unit of French automaker Renault S.A., jumped 39 percent on-year to 97,023 over the cited period, accounting for 6.8 percent of all cars sold by the five largest automakers, compared with 5 percent a year earlier.