The Korean Car Industry’s First Time Battle on its Home Turf

By  |  0 Comments

This past week GM Korea announced that sales of its Chevrolet brand automobiles have risen 27 percent year-over-year in the past six months. As FTA’s are being inked with auto producing nations, Chevy’s sudden rise in sales signals the dawn of a new era for the automobile industry here. It will be interesting to watch how Korean car makers, cozy in their long protected market, react to competition on home turf.

Looking back on the country’s fifty-six years making cars raises an interesting question: Would the industry have seen a more rapid rise to its high rank on the global market if the heavily-guarded domestic market was open to foreign competition earlier? By extension, would Korean consumers in the eighties and nineties been availed to a higher quality product sooner?

The first Korean car came off the assembly line here in 1955. Not that it was much of a line –or much of a car. Yet, the “Shibal Taxi”, as it was known, put together entirely from odds and ends, including sheet metal from oil drums and leftover U.S. Army parts, hit the road in all the glory it could muster.

The “Shibal Taxi” (????). Be careful saying ‘shibal’, it is also Korean profanity.

From that humble beginning the infant car industry meandered along at a snails-pace until 1962, when the Park Chung Hee administration set forth economic plans to transform Korea into the auto manufacturing giant it would later become.

At the onset, Korean auto-makers suffered from a dearth of advanced technology and a dismal level of productivity. This forced the industry to rely exclusively on imported components and know-how from the United States, Japan and Europe.

The Park administration was wise to capitalize on the desire of the world’s leading car companies to do business here in a newly-opened consumer market. The approach to establishing the new industry is where questions of how much faster it could have risen, by producing a better product, gets murky.

The administration first enacted strict import bans that allowed no foreign cars to be sold in Korea unless they were shipped here completely disassembled and then assembled in Korean factories. Additionally, no foreign automotive company was permitted to do market here unless partnered with the local players in Korea’s newly minted auto industry.

There was both wisdom and folly in the restrictions on foreign imports. The positive aspect was that by requiring all import cars be assembled here, the government had essentially established a national automotive hagwon; with international automotive technology delivered right to the door. This allowed the Korean industry to learn the ins and outs of assembling automobiles from the ground up.

The Chevy Malibu is making its way to Korean shores.

This was fine at first, though would later prove problematic due to an unestablished position on the world market, forcing Korean car makers to sell exclusively to the domestic market. With no competition from outside brands due to heavy restrictions, there was little incentive to make better cars here. Until the late 90’s this was of great detriment to Korean consumers, left with the choice of either buying a lower quality domestic product or paying tariffs as high as 60% on superior foreign makes.

Despite low quality, with a captive domestic market, the industry continued to grow as increasing numbers of Korean consumers wanted to get behind the wheel. It wasn’t until the late 1980’s that Korea finally surpassed North American safety regulations and were able to penetrate the immense American market. This was the first time that the industry was faced with competition on the global stage, forcing it to adjust accordingly.

It was much the same in the United States when Japan first started importing heavily into America. Suddenly, U.S. automakers found themselves competing with a superior Japanese product.

In the 1970’s the American auto industry had gone from making some of the best cars in the world, to some of the worst. The once relatively uncompetitive American market now hosted the presence of superior Japanese brands. There was no other choice but to make better cars.

The 1986 Hyundai Excel, Korea’s first foray into the North American market. Though rated low for quality, the $4,995 price tag garnered it a lot of sales in the U.S.

Likewise, despite initial quality concerns upon entering the North American market, the quality slowly rose as Korean manufacturers were forced to compete for market share for the very first time. This fight spurred moves by Hyundai to face its detractors head-on. In 1998 they invested heavily in manufacturing quality, design, and long-term research and development. So confident was the company in the quality of their new models, they offered a 10-year/100,000 mile warranty on all vehicles sold in the United States.

The plan worked. By 2004 Hyundai tied with Honda for brand quality, second in the industry behind Toyota, according to J.D. Power and Associates.

Yet, the question remains: would Korea have built better cars sooner had they faced competition here in the Korean market?  On one side there are those that say protectionism and government intervention assured that the fledgling industry was allowed to grow unhindered. The flip side is there are those who believe that competition with foreign makes would have forced Korean automakers to innovate faster to compete, thus creating a better product much earlier than they did.

No matter your position, today’s results are undeniable and the rest, as they say, is history.  As of this year, Hyundai/Kia became the fourth largest automaker in the world selling a combined 3.19 million vehicles worldwide over a six month period–180,000 more than Toyota. This is a testament to market proven quality of the product, as sales continue to rise world wide.

And much the same, the future of the industry is as good a topic for speculation as the past. With the growing popularity of foreign brands in an increasingly open market, will companies such as Hyundai/Kia, which currently holds over 70% domestic market share, rise to the occasion in their first bouts with foreign competition here at home?

Check out an interesting photo essay of cars in Korea over the years.

You can read the original publication of this article in Korean in the Joong Ang Ilbo here. (PDF)

A 1986 ad for the Excel. The headline was true, though the subtext is questionable. It clocked zero to sixty in just under 16 seconds.

The Latest Haps

Latest NewsEntertainmentLifestyleArts & CultureTravelSports

Busan Troupe Heads to Shimonoseki for Little Busan Festa

The Busan Foundation for International Activities (BFIA) will dispatch a performance troupe to the “14th Little Busan Festa” in Shimonoseki on November 23th, to activate international exchanges with its sister city and enhance the spirit of friendship that already exists. The Little Busan Festa has been held annually in Shimonoseki’s Greenmall Shopping Street, commonly known […]


Over 9,000 CSAT Tests From Last Year Rescored

More than 9,000 students who took last year’s college entrance exam will have their grades revised up because the educational authorities re-graded test papers due to an erroneous question, according to the Ministry of Education yesterday. It is not yet confirmed how many students will get the chance next year to enter the colleges they […]


Korea Vows to Crackdown on Chinese Fishermen

Prime Minister Chung Hong-won vowed today to conduct a stronger crackdown on Chinese fishermen’s illegal fishing in South Korean waters amid their growing violence against South Korean authorities. Hundreds of Chinese fishermen are arrested each year for illegally crossing into and fishing in South Korean waters in the Yellow Sea, often leading to violent clashes […]

(C) 2003 Gateway,Inc.

Haps Weekend Picks November 21,22,23

Plenty of activities are set again for another great weekend in Busan.

1 comment
Dan Deacon

Dan Deacon is Back with a Show in Seoul Nov. 28th

While being classically trained and having dabbled in movie scores, Deacon is known for the addictive melodic lines, distorted samples and acoustic textures that characterize his music. Since 2003 he’s released eight electronic dance music albums. His major break came with his first commercially distributed (third overall) full-length album, “Spiderman of the Rings,” which was […]


BIFF Gets Audited by BAI

The Board of Audit and Inspection (BAI) has begun a field investigation against the organizing committee of the Busan International Film Festival. Three officials of the Special Investigations Bureau of the BAI installed an audit room at the organizing committee of BIFF. Some believe this inspection was targeted specifically at BIFF but the BAI said it is […]


IKEA Apologizes Over “Sea of Japan” Maps

IKEA Korea, the local unit of Swedish furniture giant IKEA, apologized today for a controversial map. The map on its website and one of its products marked the water between South Korea and Japan only as “Sea of Japan.” Retail manager Andre Schmidtgall apologized in a press conference, adding that the company is aware of […]


Shinsegae Centum Hits 100 Millionth Customer

Shinsegae Department Store in Centum City has had its 100 millionth customer after 5 years of being open. The Guinness World record holder as the largest department store, Shinsegae in Centum City announced more than 100 million customers today since opening in March of 2009. The department store hit 10 million customers only seven months after […]


Korean Life Expectancy Rises to 81.3 Years

The life expectancy in South Korea is growing, but the country appears to be ill-prepared for life after retirement. According to the Organization for Economic Cooperation and Development (OECD) on Monday, the life expectancy for South Koreans stood at 81.3 years as of 2012, ranking 13th out of the 32 OECD member countries. While South Koreans’ life […]


One of a Kind UN Peace Memorial Hall Opens in Busan

The Ministry of Patriots and Veterans Affairs held an opening ceremony for the United Nations Peace Memorial Hall on November 11, 2014. The UN Peace Memorial Hall, the world’s first UN museum, which is dedicated to remembering and honoring the sacrifices of UN soldiers who were killed during the 1950-53 Korean War. Some 300 people, […]

Cosplay Koea

An American Cosplayer in Korea

Events such as these are basically a large convention hall  where hundreds to thousands of anime and comic book fans shop for exclusive and hard to find items, all while dressing up as their favorite character from a favorite series. Having been to only a few expos in the USA, I greatly missed the festivities […]


G-Star 2014 Global Game Exhibition Begins This Week

G-Star marks its 10th anniversary this year as Korea’s largest global game exhibition. Since 2005, G-Star has continued to grow and integrate other events under its banner and now attracts world wide attention as one of the world’s four global game shows. G-Star, with its slogan ‘Game is not over’ consists of areas for online […]


Nakdonggang River Eco Tour Begins

There is now another reason to come to the city of Busan; and it’s the Nakdonggang River Eco Tour. Under the slogan, ‘Nakdonggang River Eco Tour into Nature’, visitors can experience a beautiful, scenic ride along the Nakdonggang River and enjoy a new side of the city. In the same way that the Busan City […]


New Security Procedures to US Begin at Gimhae Airport

Passengers flying to the United States will no longer have to go through a second security check at Gimhae International Airport in Busan. The Ministry of Land, Infrastructure and Transport said Tuesday that it will test the new procedure during a trial period from Thursday to December 14th. It will eliminate the second security checks by […]


Kkangtong Market to Open Second Section

The nation’s first night market, Bupyeong Kkangtong market, will expand to a build a second section and begin operations. Busan city and the merchant’s association of Bupyeong Kkangtong market said they will open a 2nd section of the night market by adding a new 100 meter section in the direction of Bosu-dong to the existing 150 […]

Busan Gaelic Football Korea

Laochra Busan GAA Wraps Up Successful Season

With the end of August came the end of the Korean gaelic football season and this year Laochra Busan GAA did itself proud taking narrow second places in both the men’s and women’s national leagues. However, as September hit, there was one last competition that some members of Laochra GAA were still training for: the […]


FC Barcelona to Hold Coaches, Children’s Clinic in Busan

If there is a city in Korea that reminds one of Barcelona, that one is Busan. And if in Busan the passion is baseball, in Barcelona everyone is wild about football. And that’s maybe the next connection between Barcelona and Busan. FC Barcelona is organizing in Busan two events, one in November and the other […]


Baseball Great Randy Johnson Visits Korea

Five time winner of the Cy Young award Randy Johnson visited the Naval Academy inChangwon yesterday. Johnson who visited Korea on a tour with the United Service Organizations visited the Naval Academy to look around the Turtle Ship and meet naval cadets. Johnson is known to be working on a photo tour around the world […]




You must be logged in to post a comment Login

Leave a Reply