Description:
Korean automotive industry drew world's attention as it grew to be the 5th largest
producing country in two decades as a later comer. Now it faces a transitory period as
domestic mmket growth drops to less than 5% despite more rapidly increasing overcapacity
and it has to cope with greater competition pressure in both domestic and
overseas markets. Change in domestic market directs Korean manufacturers in two ways:
to develop more of larger cars and various types of vehicles like RVS to meet customers'
preferences and to raise their competitiveness in price and quality to survive
unprecedented power struggle among new and incumbent players. It also has to pay
more heed to social voices. Energy waste, air pollution, and traffic congestion are getting
more chronic in Korea. To alleviate these problems Korea imposes the heaviest taxes on
automobiles and gasoline among major automobile producing countries.
Entering the '90s, exports of Korean-made cars rose rapidly for several reasons. Among
these were redoubled efforts to control quality, expansion of after sales service networks,
production of a wider range of export models, and more aggressive marketing efforts.
Perhaps most importantly of all, however, the rapid rise was also due to aggressive
efforts by Korean manufacturers to explore overseas markets. Korean-made cars are now
being exported to a greater number of countries than ever as a result, especially to
developing countries. The volume of exports did in fact rise substantially as export
markets became diversified, but the growth rates between regions has varied far too
greatly. This indicates that Korean manufacturers have not yet secured competitiveness
overseas. The rise in exports of Korean-made cars was greatly influenced by external
factors such as the appreciation of the Japanese Yen.
The trade imbalance of Korean auto industry drew attention from advanced countries.
After successive reductions, the tariff rates on imported cars in Korea now stand at 8%,
which is an even lower level than in the EU. In the wake of the trade negotiations between
Korea and the US in 1995, foreign auto manufacturers were given wider access to the
Korean market.
Korean auto manufacturers have been aggressive in recent years in expanding their
overseas operations. Each manufacturer is pursuing different strategies to advance
overseas to build local production operations.