Automotive price war in full swing
Hyundai Motor has reduced prices of four popular models including the Grandeur, i40 and Veloster by up to 1 million won. / Courtesy of Hyundai Motor
By Kim Tae-jong
A price war is brewing in the auto industry as automakers compete to entice customers into showrooms by reducing prices on many popular models and even redesigned vehicles.
Hyundai Motor on Sunday announced that it will reduce the prices of the top-of-the-line models of four popular vehicles - the Grandeur, i40, i40 Saloon and Veloster - by up to 1 million won, in an effort to stay competitive after imported brands recently lowered prices.
The measure comes after Japanese automakers started selling their vehicles at discounted prices amid the weakening yen.
European automakers have also recently reduced the prices of their vehicles by 1 to 3 percent thanks to additional tariff cuts, as the Korea-Europe free trade agreement (FTA) entered a new phase three years after its ratification.
Under Hyundai’s price cut plan, the Grandeur Celebrity is now available at 39.93 million won, 1 million won down from the original price; the i40 D-Spec at 30 million won, 0.3 million won down; the i40 Saloon D-Spec at 29.2 million won, 0.3 million won down; and the Veloster D-Spec at 21.3 million won, 0.3 million won down.
“Of course, it is a big burden for us to compete with imported brands here because they have started to cut down their prices,” said an official from Hyundai Motor. “But like in other overseas markets, we will not only enhance the affordability by lowering price tags but also keep improving the quality of our vehicles to better compete with our rivals.”
The automaker will also cut the additional cost of installing a panoramic sunroof on its seven vehicles including the Sonata, i40, Santa Fe and Maxcruz.
It is the second price reduction following one in January.
The auto giant cut the price of five popular models by up to 1 million won, as part of an aggressive marketing strategy to secure market dominance this year.
Discounts were offered on top of two trims of the Sonata, Genesis, Genesis Coupe, Santa Fe and Veracruz without changes to the option packages.
The automaker has also frozen or avoided increasing the price tags of various models when launching their upgraded models, which go against its time-honored convention.
Such moves obviously affect pricing of other domestic automakers.
For example, GM Korea is now offering a 1.5 million discount on the firm’s seven popular vehicles including the Spark, Cruze, Orlando and Captiva.
Italian automaker Fiat is offering a huge discount on its vehicles with up to 5 million won deducted from the original price tags. / Courtesy of Fiat
Toyota leads trend
The price-cutting trend was first led by Toyota Motor Korea (TMK) in May, which tried to take advantage of the weakening yen.
The Japanese automaker offered discounts of about 10 percent on its vehicles, in an aggressive marketing bid to compete with Hyundai Motor on its global rival’s home ground.
For example, it reduced the price tag of its Camry sedan by 3 million won to 30.7 million won. For those repurchasing the model, it is available at the even lower price of 30.2 million won.
That puts the 2.5-liter Camry at a similar price to Hyundai Motor’s 2.0-liter Sonata, whose top model sells at 30.55 million won
“This is in line with our effort to first increase our market share here and let more people know the high quality of our vehicles through the current promotion,” a TMK official said.
Thanks to such promotions, the firm posted 128 percent monthly growth by selling 1,314 vehicles in May, up from 576 in April, according to the Korea Automobile Importers and Distributors Association.
The firm has continued to hold similar promotions involving high price cuts on various models. This July, the Camry 2.5 is being offered at a 2 million won discount, while the Camry 3.5 and the Camry Hybrid are available at 4 million won and 3 million won discounts, respectively. The firm’s sports car Toyota 86 has 7 million won deducted from its original price.
Other Japanese brands seemed to have no choice but to join the price-cutting strategy.
In the month of July, Honda Korea will offer 1 million won and 2 million won discounts on the purchase of the mid-sized sedan Accord 2.4 and Accord 3.5, respectively.
Nissan Korea has even deducted 6 million won from the original price of the luxury sedan M37.
The price-cutting competition has got even fiercer, as European automakers have started to sell vehicles at discounted prices, too. They had more room for price reduction by up to 3 percent as the tariff rate discounts from the Korea and EU FTA.
From July 1, the tariff rate on small vehicles imported from Europe reduced to 4.0 percent from 5.3 percent while the rate on bigger ones dropped to 1.6 percent from 3.2 percent
Some European brands have reduced prices more than the expected tariff cuts as a measure to boost sluggish sales and survive in the German brand-dominated market.
For example, Italian brand Fiat will offer a 4.5 million won discount on Fiat 500 Pop and the Fiat 500 Lounge and a 2 million won discount on Fiat 500c. The firm’s SUV Freemont is also available with 5 million deducted from its original price.
“We had no option, as our competitors are rushing to cut down prices,” an official from Fiat Korea said. “In fact, Fiat vehicles are manufactured in Mexico and technically are not subject to the Korea-Europe FTA, but we had to reduce prices to compete and survive.”