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Carmakers offer bargain prices as sales fall

Hyundai and Kia join smaller automakers in cut-price competition
Oct 04,2019
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Korean car companies are holding bold discount promotional events offering huge discounts in a bid to counter falling sales.

Even Hyundai Motor and its affiliate Kia Motors are starting to introduce large promotional deals, which could deepen the already dwindling sales of GM Korea, Renault Samsung and SsangYong Motor.

GM Korea is starting to offer a maximum 5.58 million won ($4,600) discount on its midsize Impala sedan this month.

The starting price for the sedan is 33.5 million won. But with the discount, buyers can purchase it in the 20-million-won range.

GM Korea’s main compact car Spark is also offering a maximum discount of 1.9 million won.

Renault Samsung Motors is offering a 4 million won discount on the gasoline turbo version of its midsize SM6 sedan.

The automaker’s QM6 SUV is also currently available with a maximum 500,000 won discount.

SsangYong Motor is offering free installment of options worth 1.9 million won for customers that purchase its 2020 G4 Rexton, which was only released a month ago.

The reason these companies are offering such bold discounts is because domestic sales have been falling and exports have been slow.

Amid falling sales, GM Korea continues to be stuck in conflict with its labor union. The parent company Renault Group has decided to cut production at its Korean unit as a result of the union strike.

SsangYong Motor has now suffered a deficit for 10 consecutive quarters.

GM Korea last month sold 5,171 vehicles, a 30.4 percent decline compared to a year ago. Even its popular compact vehicle Spark, which previously sold 3,000 units a month, has fallen to 2,743 vehicles, and its compact SUV Trax, which previously sold 1,000 units a month, was only able to sell 871 units.

The automaker is facing production problems as a result of the conflict with union workers over pay.

The company’s public brand image was hurt after it was reported that Korean union workers were even considering boycotting GM vehicles that are being imported as a means of protest.

SsangYong Motor last month sold 7,225 cars, which is a 5.4 percent drop compared to the same month a year ago.

The automaker in the first nine months of this year sold 99,027 units, which is a 2.4 percent drop year-on-year.

With low sales and a growing deficit, the company has practically stopped development of new vehicles.

In the hope of turning the situation around, SsangYong Motor’s union workers have proposed a plan that would reduce employees’ welfare. However, industry insiders say the proposal is not enough and more cost cutting efforts should be taken.

Some are already expressing doubts over whether the wave of discounts will turn things around.

“GM Korea is failing to win consumers’ trust with union workers boycotting imported models and rumors of GM pulling out of Korea,” said Lee Hang-koo, a researcher at the Korea Institute for Industrial Economics and Trade. “SsangYong couldn’t even give a cash discount because it is deep in deficit.”

Lee said it’s questionable if customers will actually buy these cars, even with the discounts.

Renault Samsung Motors last month sold 7,817 cars, a 16.4 percent increase compared to a year ago.

This is largely because of a boost in sales of its QM6 SUV. In August, the company sold 4,507 units of the SUV, with 4,048 sold last month.

But next year Renault Samsung Motor, which is based in Busan, will face a production cut.

Last month Renault Samsung Motor exported 7,391 vehicles. Of the total, 73 percent, or 5,407 units, are Nissan Rogues. But starting in March 2020 the Busan production plant will no longer manufacture the Japanese SUV.

Hyundai Motor Group is also joining in the discount race.

Starting this month, Hyundai Motor is offering a 5 percent discount on its popular sedan Grandeur. Considering that the sedan is priced around 40 million won, Hyundai Motor is offering a 2 million won discount.

Its affiliate Kia Motor is offering a discount of up to 1.5 million won on its K5.

“GM Korea, Renault Samsung and SsangYong could only survive through bold discounts, releasing new models and improving productivity through efforts such as freezing wages,” said Lee Ho-geun, a Daeduk University professor of automotive engineering.

Lee said relying too much on discounts will not improve the situation.

BY KIM HO-SEONG [lee.hojeong@joongang.co.kr]