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
The Busan Regional Meteorological Administration has lifted the heat wave warning for Busan and Gyeongnam as of 6 p.m. yesterday.
The Ministry of Justice has begun investigating the incident which two prisoners died on successive days in the punishment room of the Busan Penitentiary last weekend.
The City of Busan established a Friendship City Relationship with Ulaanbaatar in Mongolia on August 3, 2016 at Ulaanbaatar City Hall.
Here is the line-up for the Busan International Rock Festival this Friday through Sunday.
The 9th annual Ad Stars festival, which kicks off today, will host seminars, exhibitions, workshops and networking parties.
The 21st Busan International Film Festival (BIFF) has selected late film-director Abbas Kiarostami for The Asian Filmmaker of the Year.
The City of Gimhae will soon begin operating the ecology and culture park built near the grave of late President Roh Moo-hyun.
Busan will run a campaign to encourage rice consumption this fall.
The Busan Biennale Organizing Committee will hold the Busan Biennale 2016 at the Busan Museum of Art and the F1963 from September 3 to November 30
Experience traditional Asian art through dance this summer at 2016 One Asia in Dance.
The South Korean government has increased security measures at train stations to prevent possible terrorist attacks, mainly from the Islamic State group.
The Busan city tour bus will add a route in Suyeong-gu starting this fall.
You step off the bus to see a lone ajumma waiting as the only passenger for the next ride out of town.
Take a look inside the Pyeongchang Olympics House in Brazil that gave a sneak peak of what’s in store for the 2018 Winter Olympics.
Shin Seung-chan and Jung Kyung-eun took the bronze medal in the women’s badminton doubles at the Rio 2016 Summer Olympics in Brazil