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[KH Explains] In land of Hyundai-Kia, smaller carmakers struggle for survival

SsangYong, Renault, GM fight to defend 10% market share; South Korea still remains as ‘test bed’ for global carmakers, experts say

Jan. 29, 2023 - 15:32 By Byun Hye-jin
From left are Renault Korea Motors’ QM6, SsangYong Motor’s Torres and GM Korea’s Trailblazer -- their top-selling cars.

SsangYong Motors, Renault Korea Motors and GM Korea are facing another challenging year ahead, with market leader Hyundai Motor Group’s big sales push showing little signs of abating.

Hyundai and its smaller affiliate Kia, driven by demand for their full electric models, sold 688,884 and 541,068 vehicles, respectively, at home last year. Their market share stood strong at almost 90 percent in a market with a total of 1.39 million unit sales, excluding some 300,000 import car sales.

For the smaller rivals, the top priority is not seeking a drastic breakthrough in lukewarm sales but safeguarding the remaining 10 percent market share together, which is considered a crucial line of defense for survival.

SsangYong aims to reboot under new ownership

Among the three carmakers, SsangYong sold the largest number of vehicles last year -- 68,666 -- outpacing rivals Renault who had 52,621 vehicles and GM with 37,237.

SsangYong made up a modest 5 percent market share, compared to Renault’s 3.7 percent and GM’s 2.7 percent.

While its smaller competitors suffered sales losses, SsangYong posted a 21.8 percent growth in year-on-year sales, with its flagship midsized SUV Torres accounting for one-third of total sales.

“Torres has adopted enhanced design features of SsangYong’s Musso and was at a reasonable price for consumers,” said a SsangYong official. Launched in 2022, Torres’ gasoline-powered models were priced at 26.9 million won to 30.4 million won ($21,800-$24,600), almost 12 million won cheaper than Hyundai’s Santa Fe and Kia’s Sorento.

The debt-ridden SsangYong Motor’s No. 1 survival strategy has been selling cheaper cars and to target price-sensitive consumers, who would not go for Hyundai cars, industry insiders said. This year, the carmaker is expected to repeat the strategy with its electric vehicles.

Riding high on the popularity of the gasoline-powered Torres, the carmaker plans to launch its electric version, tentatively called U100, which shares the same EV platform developed by Chinese battery maker BYD.

Also in the works is KR10, a complete reboot of its hardcore SUV Korando in 19 years, with plans to launch both full-electric and gasoline versions by 2024. The carmaker has pinned high hopes on the car’s beloved off-road features to revive the brand’s core identity.

The carmaker’s renewed push comes after it was acquired by a fourth owner, KG Group, last year, after a decades-old ownership fiasco. In March, it will be relaunched under a brand new name, KG Mobility, putting an end to the 35 years of history of the SsangYong brand.

Experts called for a bolder approach of adding a completely new lineup rather than depending on the former hit cars.

“SsangYong should develop a wide range of SUVs in order to restore itself as a powerhouse of SUVs,” said Park Cheol-wan, an automotive engineering professor at Seojeong University.

“Consumers already see Torres as an old model considering the fast-paced automotive trends.”

“When it comes to the rivalry with GM and Renault at home, SsangYong has an upper hand because it is committed to expanding investments backed by its new Korean parent company,” he added.

SsangYong was acquired by two foreign automakers -- China-based SAIC Motor in 2004 and India’s Mahindra in 2011. After decades of foreign ownership, the company’s cumulative deficit stood at 1.2 trillion won as of the third quarter last year.

No immediate way out for GM, Renault

Unlike SsangYong, experts see no immediate way out for the Korean units of GM and Renault that have suffered from slowing sales over the past years.

Last year, GM Korea’s domestic sales plummeted by 31.4 percent to 37,237 units from a year earlier, while Renault Korea saw a 13.9 percent decrease to 52,621 units.

During the same period, their overseas sales rose 11.7 percent for GM and 63.3 percent for Renault, respectively, signaling that their Korean operations are increasingly playing their export base, not production base.

“In the past, South Korea has been a strategic hub for GM and Renault to expand their footing to East Asia,” said Kim Pil-su, an automotive engineering professor at Daelim University.

“With Hyundai and Kia launching quality cars at cheaper prices, the strategic positioning of the two brands has become doubtful because their cars are losing their price competitiveness.”

Park echoed the view, citing the years when GM’s Chevrolet Impala and Malibu sedans enjoyed popularity in Korea because of their cheaper pricing, but that wouldn't work any longer, he said.

Also, frequent labor-management conflicts have pushed the foreign-backed automakers to keep a low-key stance here, said Park.

“After years of repeated walkouts and tense collective bargaining talks, both GM and Renault look less committed to the Korean market,” he said.

Experts say, however, Korea still remains a “test bed” for the two carmakers, which is the key reason for them to stay.

“There seems to be some kind of a belief that if a new car model survives the fast-changing automotive trend here, it could work well anywhere,” said Park.

Seeking a breakthrough, GM Korea, who received an 810 billion won subsidy from the state-run Korea Development Bank, is scheduled to launch an upgraded version of its compact SUV Trax, which is expected to be slightly bigger than the top-selling Trailblazer.

By 2025, the carmaker plans to import and sell 10 car models, with premium pickup truck model GMC Sierra waiting for its launch in Korea this year. Together with its mainstream Chevrolet and luxury brand Cadillac, GM Korea aims to diversify its brands portfolio and cater to the needs of Korean consumers who prefer global brands to Korea-exclusive car models.

Unlike GM Korea, Renault Korea does not have any plans for new launches this year.

“We will make upgrades to the existing models, preparing for a long-term plan for business recovery,” said a Renault official.

By 2024, it looks to roll out a hybrid car with the Chinese-based Geely Automobile Holdings first exclusively in Korea and then target global markets. The midsized SUV model will adopt Volvo’s compact modular architecture platform.

“If the new SUV doesn’t sell well, it will be just a failure limited to the South Korean market, which might lighten the burden of the global carmaker,” said an industry source on condition of anonymity.

“Renault Korea is facing the worst situation here, failing to catch up the with the fast-changing trend with new car models and little investment for research and development,” said Park, the professor.

“The parent company’s commitment matters the most, but it seems the alliance between the France-based Renault and Japanese brand Nissan is weak due to the competition to take control over the Renault group.”