Published : Oct. 27, 2015 - 16:16
GS Group, a leading South Korean industrial conglomerate, is likely to return its dealership business license to Volkswagen Korea due to falling profits, affected by the German carmaker’s involvement in the snowballing diesel emissions-cheating scandal, industry sources said Monday.
A Volkswagen showroom run by GSMbiz in northern Seoul. GS
GS entered the imported car dealership business in 2012 via its affiliate GSMbi ― with three showrooms in the western region of Seoul. The company also offers a car repair service business to Volkswagen car owners under the brand name AutoOasis.
According to the sources, being a latecomer in the auto dealership market, GSMbiz has suffered from falling profits since 2014 faced with tough competition from rivals. Furthermore, Volkswagen’s recent emissions scandal dealt another blow to its new business.
“It is natural for the company to review a money-losing business, but it has yet to make any decision on the Volkswagen car dealership business,’’ a GSMbiz public relations official said.
Despite the company’s cautious response, industry insiders said GS is forecast to pull out of the auto sales business, pointing to the recent exodus of car dealers from GSMbiz.
“About 10 percent of car dealers at one of GSMbiz’s showrooms left the company last month, which reflects their concerns over falling sales,” a company official said.
Sales of Volkswagen cars in Korea were hit by the diesel emissions scandal that erupted on Sept. 18. Volkswagen Korea saw its sales slide 7.8 percent in September from a month earlier, according to data from the Korea Automobile Importers & Distributors Association.
Industry watchers said the downward trend in sales might continue for the time being as the issue damaged its brand value and customer trust.
By Seo Jee-yeon (jyseo@heraldcorp.com)