The Korea-U.S. free trade agreement (KORUS FTA), which went into effect March 15, removed 5.2 million won ($4,596) from the price of one Ford-made Lincoln, but this failed to boost sales.What do you think?
The lackluster performance was made more manifest as March saw the biggest monthly increase in the number of newly-registered imported cars; and German brands maintained their dominance.
According to the Korea Automobile Importers and Distributors Association (KAIDA), the number of newly registered imported cars last month increased by 15.8 percent to 10,648 from the previous month.
But the sales of U.S. models from Ford, General Motors and Chrysler fell in growth despite aggressive marketing activities and the 4 percent tariff deductions on all models.
Under the KORUS FTA, tariffs on U.S.-made cars were lowered to 4 percent from 8 percent immediately. The remaining tariffs will be lifted completely in four years.
Ford has lowered its price by around 2.8 million won on average, and has also cut component prices by up to 35 percent.
“We will also introduce new models from May and June,” an official from Ford Korea said. “Our goal this year is to sell over 6,000 cars here.”
Thanks to their aggressive marketing, the sales of Ford surged by 80.9 percent to 416 vehicles in March from the previous month’s 230.
At a glance, this performance seems to be a drastic improvement, but in reality, its cars are actually losing their popularity.
Compared to the same period last year, sales of Ford cars decreased by 5.9 percent and the market share also decreased to 3.91 from 4.4 percent.
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SeanHayes@ipglegal.com
My hypothesis would be as follows:
ReplyDeleteAn imported car is exceptionally expensive in Korea, typically double the price that it would be in the home country, so maybe 3 times the cost of a Korean car. This makes these cars a major indicator of wealth and prestige.
In teh Korean mind I do not see there really being a US car that competes with the German cars in prestige and lowering the cost probably even lowers the prestige some more. If a US manufacturer wanted to penetrate the high end of the market, they may consider coming out with a riduculously high priced and powerful car. Make sure it is expensive on the market, regardless of import costs going down.
Just a thought..
JacobDad brings up an important point about this, and I think it's an issue that is pretty unique to the Korean market in general. From what I've experienced thus far, I've noticed the Korean society is extremely conscientious of their outward appearance. This is apparent from the growing sales of luxury designer apparel to the booming market of plastic surgery. Seoul is the hub of beautiful people and beautiful things.
ReplyDeleteI'm not surprised the American cars are not penetrating the market all that well...Koreans love their European cars, and the more expensive it is, the more the Koreans want it. It's far and few to find a Korean (much less an American), who would choose a Ford over a Mercedes, when given the option to choose. When you add in the element of social and cultural pressures of economic class and prestige, its not surprising to find that people would not choose the American brand.
I would be interested in seeing how the American companies face against the Korean companies (like Kia and Hyundai), or even the other Asian companies, like Honda. In my opinion, such competitors seem to level a fairer playing field, rather than the "big leagues" of the European competitors.
I guess the koreans just have their own ways with their cars. The fords are just too strong for a lot of them, and a little pricier than the local brands. That's what I heard from some long island ford dealers some time back.
ReplyDeleteI think it all comes down to the econo-political background itself. Being parts of a free-trade agreement may have its backlashes, considering how some people might interpret this as either a threat to the local car manufacturers or a sign of a weak brand needing some loosening up on the tariff side of things just to sell.
ReplyDelete