Honda Korea’s abrupt exit raises critical alarm for Toyota, Lexus

Honda Korea CEO Lee Ji-hong, right, speaks during a press conference in Seoul, Thursday, to announce the company's plan to withdraw from the Korean auto market. Yonhap

Honda Korea’s recent decision to withdraw from the Korean automobile market is amplifying concerns among remaining Japanese carmakers Toyota Motor and Lexus over their long-term viability here in a rapidly shifting industry landscape.

Honda’s exit sends a clear message to its rivals that any foreign automakers which fail to embrace industrial changes — especially the transition toward electrification — will end up losing their foothold in one of Asia’s most competitive auto markets.

The latest development is seen as a warning sign for Toyota and Lexus, both of which currently lack fully electric vehicle (EV) lineups in Korea.

The Korean auto market has already witnessed the exits of several other once-renowned Japanese brands.

Subaru, which entered the Korean auto market in 2010, left after only about two years due to worsening profitability, driven by lackluster sales stemming from its limited vehicle lineup.

Nissan and Infinity, both of which once enjoyed solid popularity in Korea, also withdrew from business here in 2020, failing to overcome declining sales.

Industry officials underline that past failures from Japanese carmakers are clear examples demonstrating that firms that do not align with technological shifts and consumer preferences are eventually forced out.

Toyota Motor Korea's Camry hybrid sedan / Courtesy of Toyota Motor Korea

For now, Toyota and Lexus continue to enjoy relatively stable sales and revenue in Korea, buoyed by strong demand for hybrid cars, even as the market pivots towards mass adoption of electric vehicles (EVs).

Both Japanese brands are strong hybrid players in the global auto industry, but the advantage may prove short-lived unless they take timely steps toward electrification, as evidenced by Honda’s decision to exit from the local market, critics said.

The rapid rise of pure EV makers such as Tesla and BYD are an emerging threat to the Japanese carmakers. Hyundai Motor Group, the strongest carmaker in the domestic market, is also aggressively expanding its EV lineup and ramping up investment to preemptively solidify its leadership in the electric segment.

“Honda Korea’s exit displays growing importance for global automakers to introduce competitive EV models on time for sustainable growth here,” an auto industry official said.

“Despite hybrid leadership by Toyota and Lexus, their lack of all-electric vehicle lineups for sale in Korea is viewed as their biggest downsides, undermining their long-term prospects here.”

Lexus and Toyota were ranked seventh and 10th, respectively, in vehicle sales among imported auto brands in March in Korea, according to data from the Korea Automobile Importers & Distributors Association.

Tesla maintained its leadership during the same period and BYD came in as the fourth-largest imported carmaker by sales in Korea, proving continued customer demand for all-electric vehicles.