Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Passive consumers, gov't drive up VW sales here
The Volkswagen logo is seen on the grill of a Volkswagen on display in Pittsburgh in this Feb. 14, 2013, file photo. / AP-Yonhap
By Park Jae-hyuk
By Park Jae-hyuk, Choi Ha-young
Volkswagen’s Golf and other models are still selling well here despite the company’s cheating on emissions tests and discrimination against Korean drivers.
The local media has reported that the automaker has lured consumers into buying its vehicles by offering big discounts. However, the German automaker says the discount rate it has been offering is not much different than those provided by other imported brands.
When The Korea Times visited a Volkswagen (VW) outlet last week, a dealer at the store was extremely reluctant to comment on the business. Another dealer was busy talking with a customer.
“We tell our customers about the emissions issue when people visit our store,” he said.
However, the dealer denied reports that they are offering exceptionally big discounts to attract customers. “We are providing 7 to 8 percent as a promotional discount, but it’s the same as usual.”
Despite the cheating scandal, VW’s Tiguan and Golf ranked first and third as the most popular imported automobiles in the first half of the year here, according to the Korea Automobile Importers and Distributors Association (KAIDA).
The strong demand for VW vehicles comes even after the automaker has refused to compensate Korean drivers, while the company and the U.S. government agreed on a $15.3 billion compensation settlement. In the U.S., the company suffered a more than 20 percent fall in sales for the eighth straight month after the revelation of the emissions test cheating.
Why do Koreans keep buying the vehicles, while consumers in other countries are turning their backs?
“The quality of the car is fine, and there’s no serious flaw with the car,” said a VW driver surnamed Ji.
He sees no particular reason to take issue with the customers who buy VW cars on the occasion of the promotional events. “People who originally intended to buy cars bought them at reasonable prices this time, so it’s not something to take seriously.”
An owner of an Audi A4 said the quality and the brand power of the model is attractive enough to offset the emissions scandal. “I don’t see problems involving emissions while driving my car. It would be worth considering if it pollutes the environment seriously. But I don’t think this car is particularly bad about it.”
The public is also split on online car communities. There are postings that slam the company for intentionally fabricating emissions results and poor compensation for Korean customers. However, some Internet users defended the buyers of VW vehicles, claiming they are turning to foreign brands due to the poor quality of domestic brands.
According to a survey by Trend Monitor, a private research firm, nearly 60 percent of the respondents answered that they would consider buying a VW vehicle if the offer is reasonable enough. Only 30 percent said they would not buy the car regardless of the offer. Consumer experts said dissatisfaction with Korean vehicles also influenced the rise of VW sales.
“Before the financial crisis in 1997, most Korean consumers bought imported cars to flaunt their wealth,” said Kim Young-ho, a researcher at a consumer research firm named Consumer Insight. ”These days, consumers buy imported cars for practical reasons. While consumers of Korean cars buy the cars for the price, consumers of imported cars buy them for gas mileage, safety, and style,” Kim said.
Lee Jeong-ju, the representative of an automobile consumer association named Car AS pointed out Koreans’ hostility toward domestic carmakers.
Lee said many consumers would consider price first over a pollution issue. “Most consumers think air quality does not directly affect their lives. Rather, they think it is a chance to buy a VW vehicle at a lower price,” Lee added.
Policy change needed
Consumers in other countries are actively voicing and campaigning against the automaker. BEUC, the European Consumer Organisation, made an official pronouncement, demanding accurate information, vehicle recall, and compensation for consumers. In the U.S., the Consumers Union submitted an amendment to Congress to enhance consumer safety.
In Korea, some organizations, such as the Citizens’ Coalition for Economic Justice (CCEJ), are demanding compensation, but the actual ratio of consumers participating in the lawsuit is still low.
Lawyer Ha Jong-sun, who is leading a class action suit against VW, said, “It is true that not many consumers are participating in the suit, because they are required to pay the filing fee, up to 300,000 won. Most consumers act passively to save their money.” Ha said, “Those consumers look at the case, wishing they could get some compensation without any lawsuit.”
Environmental experts say individuals need to be more sensitive to environmental issues when they buy products. For many Koreans, price comes before the public good. However, they said consumers should think about how their consumption behavior would affect the environment in the longer-term.
“What individuals can do is limited, actually,” said Choi Ye-yong, a secretary general of Asian Citizen's Center for Environment and Health. “However, people should recognize that the diesel engine issue is closely related to their family and community, as well as to themselves,” Choi said.
Another environmental expert criticized the government’s policy, which fails to encourage customers to make environmentally friendly choices.
The National Assembly passed a law to provide a subsidy to buyers of low-carbon automobiles by collecting a tax from owners of large cars. However, the implementation of the law has been delayed to 2020, apparently by the lobby of the automobile industry.
The government used to promote diesel cars using the slogan “clean diesel.” Han Jae-gak, vice president of the Energy and Climate Policy Institute, said that this shows how the government is vulnerable to the automobile industry’s lobby. “This is a problem of the government which is easily influenced by the interests of the industry.”
“Air pollution is not something each citizen can feel closely, so government engagement is necessary,” Han Jae-gak, vice president of the Energy and Climate Policy Institute said. “If the government criticizes customers, what’s the reason for the government’s existence?”