By Kim Tae-jong
Japanese automakers are temporarily offering huge discounts on their vehicles as part of an aggressive marketing campaign riding on the back of the weakened yen. But some experts warn that such initiatives could backfire and damage brand images.
According to the Korea Automobile Importers and Distributors Association (KAIDA), Toyota Motor Korea posted 128 percent monthly growth by selling 1,314 vehicles in May, up from 576 in April.
The high growth rate comes after the Japanese automaker last month offered discounts of around 10 percent on its vehicles.
Toyota reduced the price tag of its flagship sedan Camry by 3 million won to 30.7 million won. The Camry Hybrid was available at 38.2 million won, a 4.4 million won deduction from the original price, and the price of its popular Prius hybrid car was deducted to 28.3 million won.
The firm is now holding another aggressive discount promotion in June. It now offers up to a 4 million won discount on the Camry series ― the Camry, Camry Hybrid and Camry V6. It also cuts the price tag of the Venza SUV and Toyota 86 sports car by 7 million won and offers a 1 million discount on the Siena minivan.
Stimulated by Toyota, other Japanese brands ― Honda and Nissan ― are also holding a similar promotion this month.
Nissan said it has permanently reduced the price tag of its popular luxury sedan Infiniti G25 by 5.7 million won to 37.7 million won.
The firm said it will receive orders in advance in June and start to sell the sedan next month.
“Ahead of the launch of the Infiniti Q50, we wanted to enhance our luxury brand Infiniti,” an official from Nissan Korea said.
The company is also holding a special promotion to celebrate the third anniversary of the launch of the all-new Infiniti M here.
In the month of June, the firm will run an interest-free installation program for up to 36 months and 1 million won additional discount to customers of the M37 and other M series models or 4 million won discount to those who purchase a car without using the interest-free installation.
Honda Korea is also holding a promotion to celebrate the 10th anniversary of the brand’s launch in Korea.
It will cut the price tag of the 2.4 Accord sedan by 1 million won, the 3.5 Accord and the Crosstour crossover vehicle by 2 million won by 3 million won.
Market insiders believe that such huge discounts by the Japanese brands are possible due to the weakening of the yen in the past several months, although all the Japanese brands officially deny this.
The value of the yen against the won has dropped more than 20 percent, which soared to 1538.86 on Oct. 7 but dropped to 1090.46 on May 16.
They also argue that discount promotions can have a negative impact on sales from a long-term perspective.
“Discount promotions can be a double-edged sword,” said an official from an imported car brand. “At first, a big discount promotion can help increase the volume of sales, but it can have a negative impact on the brand, because it can reduce the value of used cars and damage premium images.”
Promotional discounts are necessary on a limited basis but firms should be very careful when holding such events, he said.
Japanese brands’ promotion seem to have emerged as a threat to local automakers such as Hyundai Motor and Kia Motors, rather than imported brands.
According to KAIDA, the import automobile industry broke its all-time sales record for the second consecutive month, with combined sales of foreign carmakers amounting to 13,411 in May.
Interestingly enough, Toyota Motor took the lead in the sales growth, while the four big companies ― BMW, Mercedes-Benz, Volkswagen and Audi ― maintained the status quo.
“Japanese brands’ discount sales seem to have little impact on other imported brands, especially luxury brands, as they have different customer groups,” an official from a German brand said. “Instead, their aggressive marketing has increased the size of the imported car market.”
In contrast, domestic carmakers including Hyundai Motor and Kia Motors have reported sagging performances. Their combined sales fell by 1.9 percent on a year-on-year basis to under 98,655.