Press Releases

German car brands expand in South Korea much faster than the market

Berlin/Seoul, 02 April 2015

Seoul Motor Show: VDA brings together many suppliers at the German pavilion – leading in premium and diesel

Statement delivered by Klaus Bräunig, Managing Director of the German Association of the Automotive Industry (VDA), at the Seoul Motor Show in Seoul on Thursday, April 2, 2015, at 13.30 h

The German Association of the Automotive Industry (VDA) is now here at the Seoul Motor Show for the fourth time with an official German pavilion. This joint presence is supported by the German Federal Ministry for Economic Affairs and Energy. We wish to thank AUMA (the Association of the German Trade Fair Industry), the trade show company IMAG, and the German Embassy for their excellent cooperation. At this pavilion German suppliers are demonstrating their innovations and their performance capabilities. In addition, the German vehicle manufacturers have a large number of new models on display at the Seoul Motor Show.

Both OEMs and their suppliers are organized under the VDA umbrella. Our association has around 620 members: manufacturers of passenger cars and commercial vehicles, trailers, bodies and buses, and – the group with the most members – more than 500 suppliers.

I would like to present our position on five topics:

  • the Korean market from the viewpoint of the German automotive industry,
  • the premium strategy as a factor for the success of the German automotive industry,
  • the German manufacturers’ diesel strategy here in Korea,
  • a balance of trade between the EU and Korea,
  • and the objectives of the German pavilion.

South Korean passenger car market grew by 9 percent in 2014

The South Korean passenger car market increased by more than 9 percent in 2014 to reach a good 1.4 million new vehicles. In the three previous years it had tended to show more lateral movement. The almost double-digit growth in 2014 was supported by favorable financing conditions, the low interest rate and the introduction of numerous new models. This growth was achieved despite the high exchange rate of the won against the Japanese yen.

For the German automotive industry, of course the development of imports is especially important here in Korea. The total number of passenger cars imported rose by 25 percent in 2014 to 196,400 units.

German passenger cars dominate imports

The proportion of the entire new car market in South Korea going to imported passenger cars in 2014 was double the figure from 2010 – rising from 7 to 14 percent. This means that one in seven new cars sold in Korea last year was imported. Imports have been rising steadily since the beginning of the decade. This development is especially good for the German manufacturers. In 2014 the German group brands pushed up their passenger car sales in South Korea by 28 percent to 143,300 exported units. In the previous year the Germans had already achieved an increase of one quarter. So they are growing much faster than the market itself. German brands account for three out of four imported vehicles (73 percent). The top three imported models are all built by German makers: the VW Tiguan 2.0 TDI BlueMotion; the BMW 520d, and the Mercedes-Benz E 220 CDI.

A strong lead in premium

A look at the import market overall reveals that the premium segment is of special significance: 70 percent of imported passenger cars are premium products. And here the German brands have a strong lead: 86 percent of all imported premium cars are from German manufacturers. Obviously more and more customers buying new cars here in South Korea appreciate the outstanding quality, the sophisticated design, the high levels of safety and efficiency, and the comfort offered by German premium autos. Korea is without doubt becoming more and more important to our automotive industry as a premium market.

Exports from Germany have doubled since 2010

The free trade agreement between the European Union and South Korea came into force in mid-2011. Even before then, the German manufacturers had been able to expand markedly in South Korea. And since then Korean imports of German-branded passenger cars have continued to rise; they soared by 28 percent in 2014 alone. Of the 143,300 units 83 percent, or 119,100 cars, came from Germany. The other 17 percent came from international production sites. Compared with 2010 – that year 54,000 new cars with German badges were sold in Korea – the German makers have increased their sales by 165 percent. Exports from Germany alone have more than doubled from 53,700 to 119,100 units.

The main reasons behind this are:

  • More and more customers in Korea obviously appreciate the attractive products from German manufacturers. This applies in particular to premium.
  • Our companies have further intensified their marketing activities in Korea.
  • The German automotive industry’s expertise in diesels is paying off.
  • And of course the low interest rate, growth in GDP, and the euro-won exchange rate also have positive impacts.

So there are several factors influencing market development. The free trade agreement has reduced the already relatively low import duties. But that on its own does not explain the impressive success of our manufacturers. We would be delighted to conclude that the earlier underlying attitude of “buy Korean” is now apparently not so prevalent any more. The opportunities offered by globalization are shifting further and further into the foreground. This is because South Korea also depends on exports and thus on access to the markets in third countries.

German exports to Korea were climbing even before the FTA came into force. For example, in 2010 alone the value of exports of German passenger cars more than doubled in comparison with the previous year (rising from 658.6 million to 1.44 billion euros).

The automotive trade balance (value of exports minus value of imports) – including passenger cars, commercial vehicles, suppliers’ products, engines, trailers, bodies and used vehicles – between Germany and Korea increased in 2014 by a good half as compared with 2013, to 4.0 billion euros. The value of exports rose 37 percent to 5.0 billion euros, while the value of imports fell by 8 percent to 1.0 billion euros. Passenger cars accounted for three quarters of the export value, i.e. 3.8 billion euros.

If we take a look at the period from 2010 to 2014, we find a clear win-win situation. The value both of exports and of imports has more than doubled (+118 percent and +102 percent respectively). The figures show that this growing trade is not a one-way street but results in additional growth in both regions.

Furthermore, the non-tariff trade barriers should be removed by the free trade agreement. However, there are still some areas needing additional work. For instance, South Korea introduced – by the way, after conclusion of the free trade agreement! – an elaborate certification system for motor-vehicle parts. Individual parts imported into South Korea must be given markings, which is a complicated process. The packaging has to be opened especially for this purpose, and additional Korean marks have to be applied, and then the packaging is closed up again. Unfortunately the “e” marks used in the EU are not yet accepted here. Here we would like to see a joint agreement with the EU making business easier for all the trade partners.

When it comes to the Korean manufacturers’ export figures, it must be remembered that they have been localizing for some years now and they have their own production facilities in the new EU Member States. In the period from 2010 to 2014 the Koreans increased this foreign production by 49 percent to 572,000 passenger cars. Products therefore reach the European market through two channels: on the one hand exports from Korea, and on the other vehicles built in Europe.

Diesels also advance in Korea

One major component in the market success of German passenger car makers in Korea is our clean diesel technology. The proportion of diesel cars among all new registrations in Korea climbed from a good quarter in 2012 to over one third in 2014. Diesels are becoming more and more popular in Korea. Our manufacturers have made a special contribution to meeting this demand. In 2012 nearly two thirds (64 percent) of all German new cars sold in Korea already had a diesel engine. In 2014 this share continued rising and just exceeded 79 percent. That means four out of five cars sold by our OEMs here in Korea are efficient, low-consumption diesel models.

Increasing value of exports for suppliers, too

German-Korean trade is also developing very well for the supply companies. Between 2010 and 2014, the value of suppliers’ exports from Germany rose by 19 percent to 884 million euros, and during the same period the value of imports of Korean suppliers’ parts to Germany increased by two thirds to 343 million euros.

The German supply industry’s customers are vehicle manufacturers around the world. Our supply firms explicitly wish to deepen their contacts and business with Korean manufacturers. And naturally we also face up to the competition, in that suppliers from Korea also do not want to restrict themselves to the domestic manufacturers.

Overall we see a clear opportunity to further intensify both trade and cooperation between South Korea and the EU. The more free trade we have, the better it is for our two countries. And that is another reason why we are here in Seoul at this important trade show.

German pavilion “opens doors” for medium-sized suppliers

The German and the Korean automotive industries are both in a good global position. Both of them participate in global competition and can utilize the opportunities offered by further growth on the automotive market. We expect that the world passenger car market will expand by 2 percent to 77.4 million units over the year 2015 as a whole. That represents growth of one quarter compared with 2010 (61.7 million).

In Korea just over 4.1 million passenger cars were produced in 2014. In the EU the Korean OEMs built 572,000 units, and in NAFTA they built 764,000 new cars. A large proportion of the value-added was generated by suppliers.

We hope that the German pavilion will contribute by “opening doors,” particularly also for medium-sized suppliers. This German pavilion is intended to show that the Korean vehicle industry has extremely competent and innovative development partners in German suppliers, who stand for quality, lasting value and smart new ideas.

Please come and talk to us if you have any questions about the German automotive industry or are looking for a particular supplier. The VDA is here for you. In addition, you can read further information about the pavilion even after the exhibition on the internet: http://www.seoul-motorshow.german-pavilion.com/content/en/home/home.php.

I wish you all a successful trade show! And I invite you to come and see us again at the 66th International Motor Show (IAA) Cars that will take place in Frankfurt am Main on September 17 to 27, 2015. This year its slogan is: “Mobility connects.”

The following firms are presenting their products and innovations at the German pavilion: ACT Aerosol Chemie Technik GmbH; Dörken MKS Systeme GmbH & Co. KG; Dursol-Fabrik Otto Durst GmbH & Co. KG; Diehl Metall Stiftung & Co. KG; Huf Hülsbeck & Fürst GmbH & Co. KG; iwis motorsysteme GmbH & Co. KG; Kapolnek GmbH Schall- und Schwingungstechnik; Scherdel GmbH; Webasto Thermo & Comfort SE and Wuerth Korea Co., Ltd.

Eckehart Rotter
Eckehart Rotter Head of Department Press

Tel: +49 30 897842-120 Fax: +49 30 897842-603
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