The polarization of the imported car market is deepening. Five major brands, including BMW, Mercedes-Benz, and Tesla, account for nearly 80% of the entire market. As the presence of non-mainstream brands grows dimmer, there has even been a case of handing over import authority, the core "lifeline" of a Korean subsidiary of an imported car company, to a dealer. The view is spreading that without competitiveness to dig into niche markets, it is difficult to survive in the Korean market.
According to the imported car industry on the 13th, Ford Korea is recently reviewing a plan to hand over automobile import authority to Sunin Motors, its dealer. Typically, in the imported car business, the Korean subsidiary brings in vehicles and the dealer buys in bulk and sells them; the plan would hand over the Korean subsidiary's core function to the dealer.
Recently, Ford Korea is also said to have downsized its organization, including cutting the number of executives by about one-third. This appears to be due to the Korean subsidiary's role shrinking to a link between headquarters and the dealer.
Ford Korea is drawing a line against speculation that it will pull out of the Korean market. It said the moves are part of changing its business model, and that it will continue operations, preparing to launch a new model as early as early next year.
However, the industry says Ford Korea's decision shows the polarization of Korea's imported car market. An industry official said, "On the judgment that sales in the Korean market will be hard to significantly improve, aren't they handing over import authority to the dealer?"
In fact, according to the Korea Automobile Importers & Distributors Association (KAIDA), Ford Korea's sales from January to October this year were 3,855 units, up 23.7% from the same period a year earlier, but its market share rose only 0.11 percentage point, from 1.44% to 1.55%.
Recently, the gap between the "mainstream" and the "non-mainstream" in Korea's imported car market has widened starkly. The five brands settled in the mainstream are cited as BMW, Mercedes-Benz, Tesla, Volvo, and Lexus. All sold more than 10,000 units from the start of the year through October.
In particular, the three companies BMW (64,014 units), Mercedes-Benz (54,121 units), and Tesla (47,952 units) together hold a 66.6% share. Adding Lexus (12,855 units) and Volvo (11,929 units), they account for 76.53% of the overall imported car market. That is up 3.74 percentage points from the same period last year (72.79%). The remaining roughly 23% of the market is being fiercely contested by 21 brands.
An industry official said, "Korea's imported car market peaked when revenge spending occurred after COVID-19 and is now on a downhill path," adding, "As competition intensifies, the mainstream and the non-mainstream are becoming even more clearly divided." Another industry official said, "Imported cars' market share is on the rise this year, and that is the Tesla effect," adding, "It is hard to say the overall market mood has revived."
According to KAIDA, the share of imported cars in the overall automobile market hit a record high of 19.7% in 2022, then fell to 18.3% last year. This year, however, it was 19.9% through October, surpassing the 2022 level, and Tesla accounted for more than 20,000 of the roughly 30,000-unit increase from a year earlier. Tesla's Model Y, which underwent a facelift early this year, ranked as the top-selling model for six consecutive months starting in May.
Non-mainstream imported cars have meager sales. BYD sold 3,791 units this year alone, led by the midsize sedan "Seal" and the midsize sport utility vehicle (SUV) "Sea Lion 7," but that is less than one-third of Volvo, the smallest of the five mainstream brands. Its market share is only 1.52%.
An industry official said, "In BYD's case, the image of a Chinese car is strong, so we did not expect success to be easy, and the situation looks even tougher than expected," adding, "BYD's role will be to set the table for Chinese brands that will enter Korea in the future, such as Zeekr and Xpeng."
Audi, once dubbed part of the "German trio" along with BMW and Mercedes-Benz, has struggled for a long time. Although it has been successively launching new models to step up its push in the Korean market, it has sold 9,547 units so far and has yet to cross the 10,000 mark.
Volkswagen, which aimed for the position of a "people's imported car" with reasonable prices, sold only 4,048 units, about half of Audi's. That is a sharp drop of 39.2% from the same period a year earlier, and its market share is only 1.62%. There are a total of 17 brands with market shares at or below the 1% range. When Nissan announced its exit from the Korean market in May 2020, its share (as of April 2020, 1.05%) was not much different.
That said, even imported brands classified as mainstream cannot rest easy. As BMW and Mercedes-Benz have become more commonplace, the "exclusivity" desired by imported car buyers has dropped sharply. Consumers with purchasing power are looking for a step-up imported car, and Porsche has seized on that. Lamborghini and Ferrari mostly have high-performance vehicles that are hard for everyday driving, but Porsche has core models that can do so. As a result, Porsche's sales this year rose 32.5% year over year to 8,939 units. Its market share also rose from 3.12% to 3.58%.
An industry official said, "Even Mercedes-Benz's entry models have now largely lost their appeal to consumers," adding, "Non-mainstream brands will only be able to maintain their position in the Korean market if they secure competitiveness to dig into niche markets."