The appeal of imported cars to Koreans remains on the increase. Their market share exceeded 10 percent for the first time last year and is expected to rise to 11.5 percent this year.

How did their market share double in just five years? First of all, luxury car brands such Mercedes-Benz, BMW and Lexus, played a big role. They succeeded in attracting traditional customers of domestic large sedans like the Grandeur and Genesis with a more affordable and various range of cars.

The second factor has been the availability of more smaller cars from Volkswagen, BMW Mini and Toyota.

In December last year, Volkswagen ranked top ahead of the Benz and BMW in terms of sales. It will introduce the Polo supermini car with a 1.2 to 1.4 liter engine in the second quarter, challenging the Korean market with the smallest engine capacity of all imported models.

Hyundai and Kia are worried that they may have to surrender some 20 percent of their Korean market share to imported brands in the long term unless they can reverse the trend this year.

Domestic automakers plan to compete with imports on price. Hyundai-Kia have slashed the prices of five major models -- the Sonata, Genesis, Genesis Coupe, Santa Fe, and Veracruz -- by up to W1 million (US$1=W1,064) with the start of the New Year without reducing the available features.