Japanese cars are selling for less than domestic models in Korea for the first time. Honda Korea cut the price of the mid-size Accord by up to W5 million (US$1=W1,136) because monthly sales have dropped to about 100 units and it plans to launch new models by year's end.
The Accord 3.5L now costs only W36.2 million, a whopping W7.28 million less than the similar Hyundai Grandeur 3.3L.
Back in 2009, the Accord 3.5L cost W45.4 million, about W10 million more than the Grandeur 3.3L. But despite their high prices, twice as many Japanese cars were sold then because consumers at the time thought they are better than domestic cars. That perception has apparently changed.
Nissan Korea also recently cut the price of its flagship Altima by up to 9 percent compared to three to four years ago. The price of the Altima 2.5L has gone down from W36.9 million in 2009 to W33.7 million, and that of the Altima 3.5L from W39.8 million to W36.9 million.
New models are already more competitively priced. Toyota Korea is selling the new Camry rolled out early this year for W33.9 million, W1 million less than the old model. By contrast, most new Korean cars are priced deliberately high, with the new Grandeur 20 percent more expensive than the 2009 model.
Japanese carmakers sell more cars than Hyundai or Kia in any other major market, including the U.S., so why are they performing poorly in Korea? First of all, their brand power has declined significantly here. In case of Toyota, its invincible "made-in-Japan" image was tarnished by a mass recall across the world in 2010.
Customers' respect for Japanese brands has also died down because Korean cars such as the Sonata are highly regarded in the U.S., where they are no longer seen as inferior to the Toyota Camry or Honda Accord.
Japanese carmakers have also failed to create a comparative edge, unlike European automakers that have made steady inroads by focusing on diesel vehicles, where Hyundai and Kia are way behind.
"When we brought the Corolla 1.8L to Korea last year, we were confident that we could sell 150 units a month, but we ended up selling an average of just three per month," a Toyota Korea executive said. "We realized that we can no longer be successful unless we introduce stellar models." Nissan Korea suffered an operating loss of W34.6 billion last year.
Yoon Dae-sung of the Korea Automobile Importers and Distributors Association said, "Korea isn't a big market for Japanese carmakers, but they can’t give it up because it's the homeground of Hyundai and Kia. Since they have no solid advantage in price and quality here, they'll probably have to concentrate on niche models like compact sports cars or multipurpose vehicles which Korean carmakers aren't producing, or by bringing in cars made in the U.S. or the EU to benefit from Korea's free trade agreements."