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Hyundai Struggles as Toyota Thrives

Hyundai Kia Automotive is struggling overseas as its performance worsens in China, its key international market. Meanwhile South Korea's overseas rival Japan has been selling significantly more cars in South Korea.

While Hyundai maintained its performance in the first half of the year in the U.S., it dropped 11.5 percent in Europe and plunged 15.8 percent in China compared to the same period last year. Only India saw an increase of 11 percent. In the U.S. Kia recorded 4.8 percent growth for the first half, offering a bit of comfort to contrast the generally sluggish performance of Korean carmakers. Hyundai did particularly badly, as the only major carmaker to report declining sales in China. Car sales in China are expected to grow about 20 percent this year.

Japanese autos snared a full 30.1 percent (12,205 units) of South Korea's foreign cars sales last year, up from 19.4 percent (3,774 units) in 2003. In the first half of this year alone, 8,428 Japanese cars were sold in South Korea, boosting the market share to 33 percent.

South Korean Cars Fail To Penetrate Japan's Iron Wall

Hyundai sold 2,295 cars in Japan in 2005, but that figure dropped to 1,650 last year. For the first half of this year, Hyundai sold 925 cars over there, down by 67 from the same period last year. A total of 2,343,013 cars were sold in Japan in the first six months, of which 115,230 or 4.9 percent were foreign. Hyundai made just 0.8 percent of those.

Hyundai's poor brand image, Japan's conservative consumers and South Korea's weakened competitive power due to the devalued yen all played a role in Hyundai's worsening performance. As its biggest weakness, Japanese media point to Hyundai's limp competitive edge compared to Japanese carmakers in Japan's top-selling small car category.

Sluggish Sales In China Impede Hyundai's Overseas Expansion

Hyundai Kia's lackluster performance in the Chinese market poses serious problems. Hyundai cannot risk losing China, considering its sheer size and potential. The brand's failure to appeal to Chinese consumers in either pricing or features is the reason behind its hardships there.

Hyundai's sales in the first half dropped 15.8 percent from the same period last year, and Kia was down 17.2 percent. Hyundai Kia's share of the market for the first six months was just 5.5 percent, down from last year's 7.9 percent. The group's recent performance slump in China is attributed to its failure to respond to cheap Chinese automobiles with appropriate marketing or discounts; and on the quality front, it fell behind new models from Toyota and Honda.

Japanese Brands Becoming More Competitive In South Korea

Amid the rising sales of Japanese cars in Korea, there is a growing possibility that Japanese carmakers will soon introduce lower-end models here. Currently Japanese brands are focused on higher-end models, with only Honda selling a value model. But Honda is said to be working on a strategy to sell about 30,000 to 40,000 cars in South Korea within two or three years.

Observing Honda's performance, Toyota and Nissan are mulling over when to introduce their popular models in Korea as well. Since it builds 60 different vehicles, Toyota is especially likely to cause a sensation in the South Korean car market by bringing in a large number of low-priced models.

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