For governments anxious about bulging unemployment rates and current account deficits, such large-scale foreign investment is normally a cause for celebration. In the case of cars, however, European politicians and trade unionists find it hard to applaud in unison. All know that Europe's car industry suffers from chronic overcapacity. But some in one region of Europe suspect that, if an overseas manufacturer in another region is churning out cars by the hundreds of thousands, it can only do so at the expense of their own country's carmakers.
The fiercest criticisms of Hyundai and Kia usually come from France, where one week ago PSA Peugeot Citroën produced a car for the last time at Aulnay-sous-Bois, a 40-year-old factory outside Paris. Arnaud Montebourg, industry minister in France's socialist government, had no sooner assumed office last year than he accused the South Korean carmakers of dumping. Later on, he suggested that any French drivers buying Hyundais or Kias would be engaging in "social cruelty" because the companies' workers in South Korea were treated almost like slave ants.
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Quite correctly, EU antitrust regulators view these complaints as rather missing the point. Among the reasons for the success in Europe of Hyundai and Kia are, for sure, the less expensive production costs and labour flexibility that come from setting up plants in the Czech Republic and Turkey rather than France or Italy. But there is more to it than that.
The South Koreans offer persuasive evidence that if you make reliable, reasonably stylish cars, such as Hyundai's i30, that do not overstretch a family budget, you will not merely survive hard times, you may even expand your market share. The resources and expertise that Hyundai and Kia put into their design effort help explain why, between the onset of the 2008 financial crisis and the start of this year, the two companies doubled their combined market share in Europe to more than 6 per cent – Hyundai 3.5 percent, Kia 2.7 percent.
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