Improved after-sales service expected to become a fresh threat to Korean brands


Lee Jeong-kyu, a 63-year-old retiree, recently bought Hyundai Motor’s luxury sedan Genesis, which he said might be the last car in his lifetime.

“I had long dreamed of driving an import car of foreign brands such as BMW or Mercedes-Benz. Considering after-sales services, however, my choice was the Korean brand,” he said.

The nation’s import car market is enjoying a sales boom in recent years, with the number of newly registered vehicles surpassing 100,000 units for the first time last year.

The year 2011 was also the first year when the three big players ― BMW Korea, Mercedes-Benz Korea and Audi-Volkswagen Korea ― saw their composite annual sales exceed one trillion won ($85 million).

However, their less available after-sales service still make many Koreans like Lee hesitate to purchase import cars.

According to a survey by Marketing Insight, more than half of Korean consumers said they were willing to consider buying an import car.

But they cited customer service (36 percent) along with relatively high prices (42 percent) as the key factors that affect their hesitancy.

As the competition heats up, import carmakers are focusing on better after-sales service as a key strategy to lead the market. 

BMW operates the largest service network of 36 centers nationwide among import car brands here, followed by Mercedes-Benz with 26 and Audi with 19.

Engineers keep all replaced parts in reserve to help drivers better understand and trust their maintenance service.

Contrary to the usually long waiting time, the centers offer timely service as they own almost all key parts necessary for repairs.

“Increased sales have prompted a surge in maintenance demands. In order to overcome geographical limitations, we plan to continue expending service centers,” said a BMW spokesperson.

Mercedes-Benz, even though it runs a smaller number of service centers compared to its rival BMW, says it puts more emphasis on service quality.

The German carmaker has conducted the Integrated Service Package program exclusively for Korean consumers since 2006, which guarantees three-year/100,000-kilometer free maintenance.

Last year it also adopted Audatex, an internationally approved system aimed at giving fair quotes for automotive care to customers ― for the first time in Korea.

“The Audatex system came as part of efforts to offer more accurate and safer maintenance service. We want to set a new insurance standard on repairs,” said a Mercedes-Benz official.

Audi also opened the nation’s largest import car dealer shop and service center in Bundang, Gyeonggi Province, in April.

The three-story service center, located on a 14,832 square-meter site, can handle at least 2,000 vehicles monthly.

The high price of car parts, which led to an increase in repair charges overall, is another complaint among Korean consumers.

In a report by the Korea Insurance Development Institute last year, automotive parts of import cars were 6.3 times more expensive compared to those for Korean cars.

When it came to costs for maintenance, there was a 5.3-fold difference in prices between import and Korean cars, the agency found.

Amid growing complaints, Samsung Fire & Marine Insurance agreed in March to cut insurance premiums on repair charges by up to 20 percent with local dealers of Mercedes-Benz and Audi.

“Insurance premiums grew during 2009 and 2010 but the industry had been increasingly pressured to lower it with more complaints from customers,” said a PR official.

Other major insurers such as Dongbu Insurance Co., Hyundai Marine & Fire Insurance and LIG Non-life Insurance followed the move with Benz and Audi.

More recently in May, French automaker Peugeot said it lowered repair charges by an average of 10.5 percent following the previous 3.9 percent cut after the Korea-EU free trade pact went into effect last year.

“With the number of import cars exceeding the 100,000 mark here, after-sales service has become a key issue. We will improve consumer satisfaction with a more active policy,” said Song Seung-chul, CEO of Hanbul Motors, the official dealer of Peugeot-Citroen.

The renewed emphasis on customer service, industry sources predicted, would prompt a fiercer competition not just among import car dealers, but also with Korean car makers.

“For now, it may not be an immediate threat. But in the longer term their strengthened competitiveness could become a direct threat to Korean brands,” a source said, declining to be identified.

By Lee Ji-yoon (jylee@heraldcorp.com)