Korean cars are in decline, THAAD can't take the blame

South Korea's insistence on deploying the THAAD anti-missile system has put China-ROK relations in crisis. This has put Korean companies in China under great pressure, especially Korean automakers, which have already seen a downward trend in sales. What impact will THAAD have on Korean cars? What is the main reason for the recent poor sales of Korean cars? With such questions, the reporter decided to go to the Hyundai Motor Group's headquarters in China to find out.

It was 2pm on Friday afternoon, and the weekend was just a few hours away, but the Hyundai Motor Building was still a scene of hard work. Wu Yanbing, manager of Hyundai Motor China's marketing strategy department, said that in the four days since some of the THAAD equipment arrived in South Korea, Korean companies and cars were pushed to the forefront. We have also seen some media reports, but this is the first time that reporters have visited Hyundai Motor China directly after the THAAD incident. "As an employee of Hyundai Motor China, we can only do our job well and ensure the normal operation of the company's work. We cannot decide on other things, and it is useless to think too much," said Wu Yanbing.

Perhaps because of his long-term dealings with the media, Wu Yanbing's attitude was calm and rational. But in the elevator going downstairs, the reporter heard two Hyundai Motor China employees talking about the current political situation, and their expressions and words showed their concerns.

In order to more accurately understand the impact of THAAD on Korean cars, the reporter decided to look for answers in the market.

The turning point was not THAAD

"The impact is too great!" Before the reporter could ask more questions, the marketing manager of this Korean car 4S store said bluntly, "When THAAD was deployed in South Korea, our store's sales immediately stagnated, and many potential consumers simply gave up on Korean cars. From February this year to now, our store has not completed its sales task and is far from the target. We believe that the THAAD incident will have a significant impact on our store's sales in the next three months."

Later, the reporter went to another Korean brand 4S store, where the sales manager also confirmed the huge impact of THAAD. He told the reporter: "After the deployment of THAAD, the number of customers visiting the store has decreased significantly, and many potential customers who were waiting to see the situation have chosen other brands."

It seems that feedback from front-line sales is more convincing than that from corporate spokespersons, and the impact of THAAD on Korean cars is very direct.

But the decline of Korean cars did not start with the deployment of THAAD. The reporter checked the sales data of Hyundai Motor Group in China in the past five years. In the three years from 2012 to 2014, Hyundai Motor Group maintained double-digit growth in China. But in 2015, Hyundai Motor Group's sales in China fell by 4.9%. In 2016, Hyundai Motor Group's sales in China increased by 7% year-on-year, lower than the overall market growth rate of 13.65%. From the analysis of the market environment, the automobile market was relatively sluggish in 2015, and Korean cars were greatly affected. In 2016, thanks to the support of favorable policies, the automobile market rebounded rapidly, but Korean cars still performed poorly. In 2016, Hyundai Motor Group's annual sales in China did not reach the level of 2014.

In terms of market share, Korean cars are also losing ground. In 2014, Korean passenger cars had a market share of 8.96%, 7.91% in 2015, and 7.35% in 2016. In the first two months of this year, Korean cars had a market share of only 5.23%.

It is not difficult to see from the data that the turning point of Korean cars in China appeared in 2015, and there has been no sign of recovery since then. As the main driving force of the global automobile market and the largest overseas market of Hyundai Motor Group, the retreat of the Chinese market has directly affected the global performance of Hyundai Motor Group. In 2014, Hyundai Motor Group's global sales increased by 5.8%, increased by 0.1% in 2015, and fell by 1.75% in 2016.

The crisis of Korean cars has really come. However, what we want to know more is how could such a world's fifth largest multinational automobile group, which has created brilliance in the past 50 years and amazed the industry with its "modern speed", slow down?

Lack of awareness of potential dangers and lack of motivation for transformation

"Compared with other series of cars, the biggest problem with Korean cars is that they have no highlights. When it comes to quality and control, consumers will first think of German cars. When it comes to comfort and durability, consumers will first think of Japanese cars. Korean cars used to attract consumers with design and cost-effectiveness, but this advantage has been eroded by growing domestic brands in recent years. In terms of design, many domestic models are better than Korean cars; in terms of cost-effectiveness, Korean cars have no advantage at all. Consumers will naturally no longer pay for them." A sales manager of a 4S store told reporters.

Su Hui, executive vice president of the Physical Market Chamber of the China Automobile Dealers Association, said that the reason why Korean cars have performed poorly in recent years is that the product replacement cycle is too long and the introduction of new technologies is slow. While other companies are constantly applying new technologies, such as new energy and smart driving, Korean cars are not making any moves.

The reporter conveyed the views of dealers and industry experts to Wu Yanbing, who agreed to a certain extent. Wu Yanbing said: "Korean cars are not behind in the research and development of forward-looking technologies, but the relatively conservative corporate philosophy has prevented some new technologies from being quickly introduced into the Chinese market."

In addition to the above two points, the lack of brand power has always been a pain point for Korean cars. In the eyes of many consumers, the brand power of Korean cars is significantly lower than that of other joint venture brands, which is also reflected in the terminal selling price. Some analysts also said that Korean cars have also taken various measures to enhance their brand power over the years, but the effect has not been obvious. In this regard, Wu Yanbing explained: There is a certain gap between consumers' perception of Korean cars and the level of Korean cars themselves. For example, our car quality is stable and often ranks high in reports from third-party institutions, but consumers do not agree.

In a blink of an eye, Korean cars have been introduced to China for 15 years. Overall, the sales volume of the two joint ventures has continued to grow, but the brand power has always been at a low level among joint venture brands. "From the perspective of the global automotive industry, Korean cars can only be regarded as newcomers. Compared with German, American, Japanese and French cars, their system capabilities and technological accumulation still have a certain gap. After entering China, the vast market space has allowed Korean cars to live a comfortable life. They don't have to worry about sales and profits, which inevitably leads to a certain degree of inertia. In addition, Korean cars are located between other joint venture brands and independent brands in China, and have a relatively stable consumer group, but this situation will change due to the continuous upward impact of independent brands. Whoever is at the end of the joint venture brand will be the first to be impacted." An industry insider said.

Ye Shengji, deputy secretary general of the China Association of Automobile Manufacturers, said that it is obvious that the rise of domestic brands has diverted sales of Korean cars. However, if we analyze it from the perspective of Korean cars themselves, the gradual fading of product characteristics and unfavorable brand building are the main reasons for their predicament.

According to the analysis of enterprises, dealers and experts on the sluggish performance of Korean cars, the slow introduction of new technologies, long product replacement cycles, insufficient brand power and the impact of domestic brands are the main reasons. However, behind these reasons is the lack of awareness of potential dangers and the lack of motivation for transformation.

But Korean cars have not forgotten to expand. Last year, Korean cars added 300,000 vehicles of production capacity in China, and this year the new capacity will reach 300,000 vehicles. The situation has taken a sharp turn for the worse, and the previous capacity layout seems a bit awkward.

The cost of expansion

Use copper as a mirror to adjust your attire and appearance; use history as a mirror to understand the rise and fall of things.

Looking through the history of Hyundai Motor Group, the reporter saw Hyundai's speed and achievements, as well as the setbacks and crises that Hyundai Motor Group encountered during its development. At the same time, the reporter noticed that almost every time before a crisis, Hyundai Motor Group had a wave of rapid expansion, and during the period of rapid development, it was accompanied by the rapid development of new technologies.

In 1997, when the Asian financial crisis hit, Hyundai Motor Group did not stop its pace of mergers and acquisitions. In order to prevent Ford from entering South Korea, Hyundai Motor Group spent money to buy Kia Motors first, and acquired part of LG's business against the backdrop of declining global basic chip sales. This large-scale expansion left Hyundai Group heavily in debt, and its distribution company in South Africa also declared bankruptcy.

Coincidentally, the second crisis experienced by Hyundai Motor Group was also related to expansion. In 2006, Hyundai Motor Group was eager to expand overseas, causing its net profit to decline sharply. Coupled with the sharp appreciation of the Korean won against the US dollar and the arrest of core leaders for bribery, Hyundai Motor Group once again fell into crisis.

On the contrary, the most important task of Hyundai Motor Group in its golden period of development is to explore technology. Throughout the 1990s, Hyundai Motor Group devoted all its energy to improving its own technology, not only developing the first independently designed Alpha engine, but also creating the design concept of modern cars. Its rise once made the world's automobile industry exclaim "Be careful of Hyundai cars passing through the rearview mirror."

Since 2012, Hyundai Motor Group has begun expanding its production capacity in China. However, in key areas such as localized research and development and the introduction of new technologies, Korean cars are clearly lagging behind other joint venture brand competitors, and the crisis has ensued.

"In pursuit of sales, manufacturers blindly impose tasks on dealers. Last year, our store was under great sales pressure. In order to complete the manufacturer's tasks, we had to sell cars at a loss, which caused chaos in the terminal price system." A sales manager of a Korean brand 4S store told reporters.

However, the chaos in the terminal price system is a great harm to the brand. If the brand cannot be improved, it can only linger in the middle and low-end of joint venture brands and will inevitably be impacted, which has put Korean cars into a vicious circle.

No time limit for recovery

South Korea's deployment of THAAD has cast a shadow over the troubled Korean cars. Judging from the current situation, it will be difficult for Korean cars to get out of the predicament in the short term.

The reporter received feedback from dealers that sales will continue to decline in the next three months. Su Hui believes that the unfavorable situation of Korean cars in 2017 will be difficult to reverse.

But in fact, for Korean cars, the impact of political factors on them is beyond their control. However, strengthening their own capabilities and making targeted adjustments in strategic directions are the key to their future development in the Chinese market.

The crisis that Japanese cars encountered in the past few years may be of some reference value to Korean cars. In September 2012, the Japanese government announced that it had "purchased" the Diaoyu Islands, infringing on my country's territorial sovereignty and causing tensions between China and Japan. Japanese cars were also greatly affected, and in the following two years, Japanese cars performed poorly. It was not until 2015 that Japanese cars achieved a turnaround and have maintained a good development momentum in the past two years.

During the period when Japanese car sales were declining, most people in the industry were optimistic about their future recovery. The reason was that Japanese cars were indeed unique in terms of product strength, especially in terms of high comfort and durability. In terms of technology, Japanese cars have obvious advantages in areas such as hybrid power. However, the industry is slightly pessimistic about the crisis faced by Korean cars this time.

"If Korean cars want to turn around, they must develop unique competitiveness, but this is precisely the shortcoming of Korean cars at this stage. Compared with other joint venture brands, it is very difficult for Korean cars to catch up in traditional technology and system capabilities. This means that if Korean cars want to make a breakthrough, they must focus on exploring new technologies and new business models." An industry insider told reporters. In addition, Korean cars also need to adjust their existing competitive thinking. If they continue to pursue size and scale, they will probably become more passive.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.