South Korea auto industry drafts blueprint to enter North American market
South Korea's budding automobile industry is gearing up to export low-cost subcompact passenger cars in an effort to copy Japan's successful performance. In the mid-1970s, the government encouraged the local auto industry to expand its production capacity in a drive to add automobiles to its list of export items. But the plan proved to be premature because Korean cars could not pass strict quality and performance tests required by most advanced nations.
Undaunted, South Korean automakers intensified their research and development efforts, and by the fall of 1981 Hyundai Motor Company, the nation's pioneer automaker, produced a subcompact car that passed official tests in Britain, qualifying the vehicles for sales in most European Community nations.
''But no matter how you slice it,'' says a Hyundai executive who wants to remain anonymous, ''our - and Japan's - major market is North America. And if Japan can do it, why can't we? But first we want to crack the Canadian market and then try the tough US market.''
The Hyundai official said that the company's Pony model powered by a 1,439cc engine went through a series of tests for six months in 1982 to determine whether it met the rigid Canadian motor-vehicle safety standards. It also successfully underwent braking, deceleration, emission, noise, and fuel-efficiency tests as well as winter tests to see if the Pony performs properly and lasts well in the severe Canadian winter climate.
Hyundai established its North American beachhead in Toronto in June 1983 in the form of Hyundai Auto Canada and shipped 2,500 Pony cars for trial marketing.Hyundai officials in Toronto say the Pony model has already won recognition by potential Canadian buyers as an ideal family car that is easy to maintain, reliable, and offers ''value for the money,'' the company lists current export prices as between $2,700 and $3,600, depending on model specifications and accessories.
The cracking of the Canadian market, the company believes, will not only help attain Hyundai's 1984 export goal of 30,000 passenger cars, including newly developed compacts that cost slightly more than the Pony, but also will lead to an eventual debut in the large US market.
Hyundai plans an extensive market survey in the United States later this year. Meanwhile, aware of the difficulty of breaking into the already crowded US market, the largest South Korean automaker recently sold 10 percent of its equity to Mitsubishi Motors of Japan for $9 million. The Japanese firm will supply Hyundai with design and manufacturing know-how for its new front-wheel-drive model.
By 1985 Hyundai is expected to complete an additional 300,000-unit assembly plant which would increase its total annual production capacity to 440,000. This would substantially lower unit production costs, resulting in increased competitiveness in global markets for the cars.
While Hyundai boasted 77.5 percent of South Korea's passenger car production last year, Daewoo - the nation's second largest automaker - claimed 22.2 percent. But Daewoo Motors is optimistic about future prospects. The company expects production will at least double this year, to 30,600 passenger cars, and then repeat a similar performance by 1985.
Daewoo, which has a 50-50 joint venture deal with General Motors of the US, is secretive about its plans, but industry analysts in Seoul believe GM is considering initially marketing 50,000 Daewoo subcompact cars through its US sales network.
The government's economic planners realize that the domestic market alone will not be enough to maintain a full-fledged auto industry and that exports must be encouraged if the industry is to survive.
Thomas H. Pyle, second vice-president and manager of the Chase Manhattan Bank in Seoul, predicts that ''if all goes well, South Korea may well reach its target of having 3 percent of the world's export market by 1990.''