BMW Korea chief describes Driving Center as ldquoautomobile theme parkrdquo

BMW Korea chief describes Driving Center as “automobile theme park.”

BMW Reigns Supreme Over South Korean Import Market

Last year was the German marque’s best ever in Korea, with sales of 33,066 vehicles, accounting for more than 21% of all new import registrations. Including the Mini brand, the automaker’s share stood at 25%.

Years ago, if anyone suggested imported cars would make inroads into the highly tariffed South Korean market, he would have drawn much laughter from analysts, and even from the man in the street.

Koreans, throughout the generations living in the era of the automobile, have been fiercely nationalistic in their purchases – except for a few at the top of the income stream with the resources to shop foreign.

But now the burgeoning Korean middle and upper middle class has driven purchasing power high and wide, while free-trade agreements have sent import tariffs to the bottom and in 2015 many will disappear entirely.

Imports not only are gaining dramatically in Korea, with the domestic market down or languishing, but they also are robbing Hyundai and Kia of much-needed profits in the luxury-car sector.

Five years ago, with Korean affluence well-established, the 23 import brands collectively held 6.0% of the country’s automotive market, with deliveries of 61,648 new vehicles out of total domestic sales of 958,854.

In 2013, the number of imported cars sold in Korea shot up 250% to 156,497 units, passing the 150,000 mark for the first time and taking 12.1% of total sales of 1,137,027. That was achieved in an overall Korean domestic market that was down 2% year-on-year, with deliveries by Korea’s five local automakers off 2.1%

The Korea Automobile Manufacturers Assn. expects total sales, including imports, to grow only 2.2% this year. But the Korea Automobile Importers and Distributors Assn. projects 10% growth by the imports, noting this is conservative and takes into account high levels of consumer debt and consumer doubts about the economy.

Leading the onslaught, and dramatically ahead in the import charge, is BMW Group Korea. Last year was the brand’s best ever, with sales of 33,066 vehicles, up 17.5% year-on-year, and accounting for more than 21% of all new import registrations.

Next closest was Volkswagen, which sold 25,649 vehicles and Mercedes-Benz, which once led the pack, recording 24,780 deliveries. Audi was fourth with 20,044.

Combined with its Mini brand, whose sales increased 6.3% to 6,301 units, BMW Group's total deliveries hit 39,367, taking 25% of South Korea’s total import market.

At his annual news conference, BMW Korea President and CEO Kim Hyo-joon notes a new milestone also was reached by the BMW Motorrad, with 1,328 of the 0.5L motorbikes sold, a 20% increase over 2012.

Kim says the hot seller in the car portfolio for 2013 was the new BMW 5-Series, which saw deliveries jump 22% to a record 14,867.

The importers’ association rates the BMW 520d model as the top-selling imported car of 2013, with 8,346 deliveries, far ahead of the next best seller, the Volkswagen Tiquan 2.0 TDI Blue Motion, which posted sales of 5,500.

Kim predicts “a landmark year” of double-digit growth for 2014, noting BMW got off to a good start in January with 3,408 vehicles sold, the brand’s highest-ever single sales month in Korea. The KAIDA says BMW’s share of imported sales last month was 22.9%.

Trailing BMW by a wide margin in January was Mercedes, which sold 2,773 units, followed by VW (2,700) and Audi (2,137). With sales of 11,018 units among them, the four German marques in January held nearly 75% of the Korean imported-car market.

New Models to Drive Growth

The outlook for double-digit growth by BMW is unquestionable, analysts believe.

The automaker has an especially high number of new-vehicle offerings slated for Korea this year, with the addition of the all-new 2-Series bringing the full lineup of 1-Series through the 7-Series and X-Series lineup to the country.

The new 2-Series coupe will go on sale in Korea in March. Also released during the first half of the year will be the new 4-Series Convertible, 4-Series Gran Coupe and high-performance M3 Saloon and M3 Coupe.

In the latter half of the year, BMW will launch sales of three new models in its X lineup, the X3, X4 and X6.

Adding a new dimension in Korea, as in other world markets recently, the i3 all-electric urban- class hatchback will be offered in April. The EV offers an optional range-extending gasoline engine in the U.S., but that feature appears unlikely for the Korean market.

It soon will be followed by the i8 Grand Touring sports coupe, a plug-in hybrid.

“The release of the electric models by the BMW Group implies a revolutionary change in transportation for individual mobility in a megacity like Seoul,” Kim says.

“The (i models) are going to be a keyword for improving the quality of life. The BMW i3 and i8 should do their part to help make the green, electric-car industry of Korea become vibrant as soon as possible…and we anticipate they will become the new growth engine for the automotive culture and even the economy of Korea.”

The third generation of the Mini also will launch in Korea in April.

There have been complaints that import brands charge more for parts and service than Korea's homegrown Big Five automakers. Kim says, however, that BMW’s parts prices in Korea are lower than those in the U.S., China and Japan, and that they are only 5% higher than the OEM parts available in Germany.

BMW is committed to sustainable growth with Korean manufacturers and is working with 18 local companies as Tier 1 suppliers, the executive says.

The automaker operates 37 BMW showrooms and 15 Mini showrooms in Korea, as well as 40 BMW and 11 Mini service centers. The group has eight authorized full-service dealers in Korea and the largest number of service centers and showrooms among all import brands.

All of the service centers are being upgraded in a sweeping program that runs through 2017, and an additional 17 centers for both brands will be added by the end of 2014.

Kim, 57, joined BMW Group Korea in 1995 and has been president and CEO since 2000. Analysts say he is largely responsible for the company holding the No.1 position among Korean importers for the past 13 years.

Two years ago he established the BMW Korea Future Fund to help disadvantaged youth, teach children about science and pursue other philanthropic work. Initially funded by BMW and seven major dealers, it relies on customers to make voluntary donation of 30,000 won ($28) when they purchase a vehicle. This amount is matched by the dealer and again by BMW Korea. If BMW Group Financial Services finances the sale, another 30,000 won is added, bringing the total donation to 120,000 won ($112).

When the program was launched Kim said it would be self-financing with funding starting at about 2 billion won ($1.9 million) per year. This is projected to reach 5 billion won ($4.7 million) annually, which indicates he thinks BMW sales will maintain steady growth.

BMW management in Germany were so impressed with this program they have adopted it in other markets as well.

Kim also persuaded his bosses in Germany to establish a 70 billion won ($65 million) BMW Group Driving Center, an automotive theme park featuring six dedicated courses over which the public can drive BMW and Mini vehicles under the instruction and guidance of professional drivers.

Scheduled to open this summer near Incheon International Airport on Yeongjong Island, it also will house a BMW museum, restaurants, exhibits and other amenities. Kim thinks it will attract some 200,000 visitors annually.

 “This is Korea’s first-ever automobile theme park where everyone, regardless of gender or age, can visit for quality time together… I am absolutely convinced the BMW Group Driving Center will provide such happy moments and develop diverse cultural experiences that enhance social values.”

Beyond heavy advertising and promotional activities to move cars and motorbikes, Kim has his sights set on making the BMW acronym a respected household name, much at home in the vernacular of middle-upper- to upper-income families.

They’re not made in Korea, and likely never will be, but Kim wants Koreans to believe BMWs are the best money can buy.

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