Germany ‘invades’ South Korea

In the past few years, South Korea has engaged in free trade deals to boost its domestic industries, including the automotive industry which is the fifth largest in the world. The free-trade agreements have threatened the automotive industry in other countries, including Australia and Canada, where South Korean car brands are cheaper and more popular, even when import tariffs were in effect.

But after international domination, South Korea has to face a battle in its own homeland. For the first time in almost two and a half decades, South Koreans is spending more on imported luxury vehicles from Europe - with which the country struck a free-trade deal in 2011 – than on local car brands, and mostly on BMW’s and Mercedes-Benz’s. From January to September 2014, South Korean imports valued at US$4.6 billion while exports were slightly less at US$4.4 billion.

In just a decade, imported cars rose from a mere 3% to 14% presently, of which more than 70% comprises of German marques. Local sentiments, which are well known to be exceedingly patriotic, are changing. In the past, when the country’s economy still lagged behind the more established economic powers, South Koreans felt obliged to support their local businesses; but no longer. Carmakers like Hyundai, Kia and Ssangyong once enjoyed the protection of a 50% import tariff, which is more than enough to coax citizens to buy locally made cars, but protectionist policies have slowly been stripped away. 

Even though South Korea is only the eleventh largest car market, it has not been neglected by the world’s top automakers. BMW invested US$64 million to open a driving centre in Incheon for drivers to test BMW’s and Mini’s on a 1.6-mile track. Toyota launched a showplace in Seoul to simply display, not sell, its high-end Lexus models as part of its branding efforts. It appears that South Koreans - following in the footsteps of their neighbours, the Chinese - are cultivating a taste for premium vehicles. It's no surprise for within just four years, the country’s disposable income has increased by 25%, from US$594 billion in 2010 to US$735 billion this year; and we know more disposable income means they will be looking for more ways to spend their money on more expensive things. So, if any premium auto manufacturers are looking for somewhere to ply their wares, South Korea’s the place to be. 

BMW's driving centre in Incheon

image: koreaherald.com