BMW Shakes Hyundai’s Tree

German automaker invests US$62 million (₩70 billion) for driver centre in Korea.

In what seems to be just a few short years, we have become accustomed to the relentless onslaught of Korean car companies as they push for global domination. Perhaps the most famous of them is the Hyundai Group, which only started making cars in 1967 and has now become the world’s fifth largest manufacturer. But it now seems that the once home market fortress is starting to crave more elite rides, with imports of BMW and Mercedes surging despite the overall market being stagnant at about 1.4 million units per annum.

The statistics for 2013 show that foreign automakers accounted for almost 12% of all new car sales in Korea, a remarkable figure when you remember that in the year 2000, non-Korean cars only made up 0.4% of the total. Analysts are predicting that this figure could rise to 13% of new car sales (180,000 units) this year and to 20% by 2016.

Luxury and premium brands have played a key role in the increased market penetration of the foreigners. In this market sector, they have almost tripled their volume in the past five years, increasing to 97,054 in 2013 from 36,096 in 2009. In the first six months of this year, 58,437 units have been sold which is a whopping 26% increase.

Growing affluence in the Korean market and the long lasting effects of free trade treaties, with Europe in particular, has been significant in the rise of imports. Tariffs on EU imports with engines above 1.5 litres ceased in July while, within three years, cars brought in from the States will no longer be charged import duty.

“The top 10% of the population here has 37.7% of the country’s income and 1% owns 40% of the nation’s assets,” said Dae Ryun Chang, Professor of Marketing at the Yonsey School of Business in Seoul.

There has been a noticeable trickle-down effect of wealth and an increasingly affluent middle class is largely responsible for the double-digit sales growth in the luxury market; the value of luxury good sales rose to more than US$5 billion last year. Added to this is a nuance in the market known as the Gold Misses, a social group that comprises of single women in their late twenties to early forties who can earn up to US$300,000 (₩300 million), ten times the national average. Notably, this group of single ladies accounted for 42% of all new MINI sales.

Chang said that “sophisticated Korean consumers do not consider Korean auto brands and products as premium.” This perception is good news for manufacturers such as BMW, Mercedes and Audi. The big German three accounts for 80% of all imported premium cars sold in Korea.

BMW has been the number one premium import brand for 17 of the past 19 years, but they don’t intend to get complacent. This month, BMW will open in South Korea its first facility in the world that combines a brand experience centre with multiple test tracks. The centre, which is close to the new international airport at Incheon and about 50km from the capital Seoul, was built at a cost of US$62 million. The centre is designed to offer customers something they can't get when battling through city traffic: the chance to experience BMW’s so-called "sheer driving pleasure" on a 2.6km-long track; SUV owners can test BMW’s xDrive all-wheel-drive system on a 30-minute drive on an off-road course. 

BMW expects the complex to attract 200,000 visitors annually, starting in 2016. BMW’s customers and eight exclusive dealers in Korea can book a gamut of services at the complex, from basic test drives to advanced driving programmes. 

Although the primary intention is to promote the BMW and MINI brands, BMW hopes that the complex ultimately generates enough revenue to cover its operating costs, according to Ian Robertson, Head of BMW Brand Sales and Marketing. There are two other BMW brand experience centres, which is the BMW Welt in Munich and a new complex in Shanghai’s former Olympic Games Park opened just last year. Robertson added that BMW is considering setting up another couple of complexes.

images: bmwblog.com, info.bmw-driving-center.co.kr