Carmakers Spur Global Strategies
By Ryu Jin
South Korea's five domestic carmakers are focusing more and more on global strategies to overcome difficulties at home, as they witness a widening gap between their domestic sales and exports.
Facing such difficulties as a strong won, high oil prices and intensifying competition on the global market, they are doing their utmost to cope with the crisis.
While trying to cut various costs on the one hand, they are also stepping up efforts to improve the quality of their products and fortify publicity activities on the other.
In the first five months of this year, a total of 1.18 million vehicles including sedans, buses and trucks were exported, about 2.4 times more than the number of automobiles sold at home, which stood at around 495,500 in the same period.
The sales priority of the country's carmakers was placed on the domestic market five years ago. When domestic sales (1.62 million) were set at 100, the proportion of exports (1.5 million) was 93.1 percent in 2002.
But the ratio has consistently increased to 137.7 percent in 2003, 217.6 percent in 2004, 226.3 percent in 2005 and 227.5 percent in 2006, a common phenomenon for all vehicle types, according to the Korea Automobile Manufacturers Association (KAMA).
Experts attributed the widening gap between exports and domestic sales largely to the gradually shrinking domestic market, which reached a peak of 1.62 million in 2002. Last year, domestic carmakers sold only 1.16 million vehicles at home.
To cope with this, the country's leading automakers have paid more attention to other parts of the world in the past five years, exploring overseas markets and fortifying aggressive marketing strategies abroad.
Sales both at home and abroad of the five carmakers _ Hyundai and KIA Automotive Group, GM-Daewoo, Renault-Samsung and SsangYong _ increased thanks to their performance abroad in the first half of the year, though domestic sales remained somewhat sluggish.
Hyundai Motor, the country's top automaker, said early this month that its auto sales at home and abroad rose 8.5 percent in June to 227,533. Sales in the first half of the year rose 3.7 percent from a year earlier to 1.29 million, the company said in a statement.
KIA Motors, a Hyundai Motor affiliate and the country's third-largest automaker by sales, said its sales from January to June rose 2.8 percent from a year ago to 677,231. However, its sales fell 3.1 percent in June to 112,481.
However, the Hyundai and KIA group, which suffered a series of difficulties at home and abroad last year, is stretching its wings again this year with the improved quality of its products and global management coming to fruition.
While it has been succeeding in its continuous endeavors to enhance its brand images abroad, the group is also stepping up efforts to expand production bases across the world, from Asia to Europe and America.
Hyundai Motor exported a total of 1.03 million vehicles earning some $12.1 billion in 2006, which accounted for about 3.8 percent of the nation's total shipments.
Sales also topped 27 trillion won ($29.1 billion), roughly 3.2 percent of the gross domestic product (GDP), leading the country's economic growth last year.
Hyundai Motor, along with KIA Motors, produced more than one million vehicles in its overseas factories in the United States, India and China. In April, KIA completed a plant in Slovakia and Hyundai Motor started construction of another factory in the Czech Republic.
The Hyundai and Kia Automotive Group broke through the 5 percent barrier in market share in the United States in June, for the first time since Hyundai Motor began exporting cars to the U.S. in 1986.
Hyundai Motor sold 49,368 vehicles in the United States in June, while KIA Motors sold 26,288 vehicles. The combined sales of 75,656 accounted for 5.2 percent of total sales there.
``Sales in the U.S. last month rose some 11 percent from a year ago,'' a Hyundai Motor spokesman said. ``We anticipate that brisk sales will help the company meet its target of selling 550,000 cars throughout the year in the U.S., the world's largest auto market.''
Hyundai Motor's ``Santa Fe'' crossover sport utility vehicle (SUV) and Sonata sedan were the main contributors to the strong sales. During the same period, sales of General Motors' automobiles plunged 21 percent, while Ford saw its sales drop more than 8 percent.
Findings by the U.S. Insurance Institute for Highway Safety showed that Hyundai Motor's ``Santa Fe'' and Kia Motors' ``Sorento'' were among the best performing SUVs in crash simulation tests.
Good performances also affected the stock prices of the automakers. Hyundai Motor climbed 2.8 percent after the company said its U.S. vehicle sales in June jumped 11 percent year-on-year. KIA Motors also surged up 2.7 percent despite a wage dispute between its union and management.
Other players are also making efforts to overcome similar difficulties faced at home. While their overall domestic sales in this year's first six months remained sluggish, their exports have been increasing.
GM-Daewoo Auto & Technology, the country's second-largest automaker, said sales climbed 32.8 percent from a year ago to 483,655 in the first half, while sales jumped 35.7 percent in June to 84,700.
Renault-Samsung Motors also performed well in the first six months with sales up 9.2 percent from a year ago to 82,463. But the company's sales declined 9 percent last month to 13,148.
Ssangyong Motor, the country's smallest automaker, said its sales rose 8.3 percent in June to 11,437 vehicles, some 5,850 in South Korea and 5,587 overseas.
Given the performance in the first half, KAMA officials said that 2007 domestic sales of the five automakers are expected to rise 7.5 percent to 1.24 million by the end of the year.
``Demand on the domestic market has been stagnant in recent years and the country's automakers have taken aggressive moves to explore overseas markets,'' an industry source said. ``So we expect the gap between exports and domestic sales to widen further in the coming days.''
Exports to Eastern Europe and Latin America, in the meantime, showed a steep increase in the first five months of this year, according to KAMA on Sunday.
Car exports to Eastern Europe, including Russia, Ukraine, Romania and Bulgaria, soared 45.3 percent from a year earlier to 168,749 units in the January-May period.
KAMA attributed the rise to rapid economic growth in the region and aggressive marketing by the South Korean automakers that have made inroads into newly developing countries.
During the period, exports to Latin America and Africa also gained 48.2 percent and 21.2 percent, respectively, from a year ago to 118,722 units and 74,640 units.
But a strong won and production expansion in the United States by Hyundai Motor set back South Korea's car exports to the U.S., the country's biggest overseas car market. Exports to the U.S. slipped 3.7 percent in the six-month period from a year ago to 366,176 units.
Executives of the domestic automakers are well aware that there is no other solution than the improvement of quality that will surely enable them to survive the global competition amid the changing environments.
Hyundai Motor, for example, has been endeavoring to develop high value-added vehicles to pull up its sales and net profits. The ``Hyundai Genesis,'' which made its debut last April, presents the direction that the company is following to survive the global competition.
The ``Genesis'' is a concept model of a new RWD premium sedan, project-named ``BH,'' which will be unveiled in December. Hyundai Motor aims to enter the premium car segment with the new sedan.
The company's image abroad has so far been confined to recognition as a brand selling relatively low-priced economy vehicles, compared with other global makers such as BMW, Mercedes Benz and Toyota.
In the domestic market, small- and mid-size cars such as ``Click,'' ``Avante'' and ``Sonata'' allow about a 10-percent profit margin while large cars such as the ``Grandeur'' gives 15 to 20 percent.
Sales of the company topped 27.33 trillion won last year, but the operating profit remained at around 1.23 trillion won, which caused the company to focus more on the development of high value-added premium models.
With the 3,800cc- and 4,600cc-class models, the BH luxury sedan is directly targeting BMW's ``5 series'' and Mercedes-Benz's ``E-Class.'' Hyundai Motor plans to release the 3,800cc-model on the domestic market first and then export the 4,600cc model to the United States next year.
Hyundai Motor efforts to enhance the quality of its products have already come into fruition. The ``Santa Fe'' has taken top place in the mid-size crossover sport utility vehicle (SUV) category six times in the past seven years in the annual Vehicle Satisfaction Awards (VSA) by AutoPacific Inc.
``Motor Trend,'' the world's leading car magazine, also praised the 2007 ``Veracruz'' in its July edition over Japan's luxury SUV Lexus RX350. The ``Veracruz'' was rounded up as ranking first place in terms of design, interior, price and speed, beating out the Japanese crossover utility vehicle (CUV).
Officials said the Hyundai-KIA Automotive Group have a long-term vision to take a leap in the coming years through the enhancement of quality, the development of new cars including hybrid vehicles and an improvement in profitability.
Other players such as GM-Daewoo and Renault-Samsung are also planning to unveil their new vehicles based on state-of-the-art technologies in the latter half of the year to increase sales both at home and abroad, while actively coping with exterior variables such as fluctuating exchange rates.