Mercedes Insolence
Mercedes-Benz has recorded its best-ever sales results this year, becoming a “giant” in the imported vehicle market in Korea. As the company sold nearly 1,250 units of the S500, currently priced at 200 million won (US$170,794), the accumulative sales as of November stood at 42,044 units, competing with BMW for the first place in domestic sales.
However, there are dark sides despite the rapid growth. Earlier, a man in the city of Gwangju, Korea, wrecked a Mercedes-Benz S63 AMG with a golf club after the company rejected his demands for exchange or refund. After the incident, Mercedes-Benz finally answered him. This is a great example of the company’s attitude towards Korean consumers. In addition, there is a growing tide of consumer complaints about continuous recalls, unclear pricing methods and unsatisfactory customer services.
In fact, there are only a few foreign companies that recorded the rapid growth in sales that Mercedes-Benz Korea did in recent years. Most of them provide better corporate social responsibility and customer services according to growth.
However, Mercedes-Benz is going against the common-sense stream. Rather, the company generates a lot of criticism that it neglects Korean consumers. Although it posted more than 40,000 units in annual sales and 200,000 units in accumulative sales in the domestic market, the company issued recalls and provided compensation for significant defects, such as stalling, only to cases that caused social controversy.
According to industry sources on Dec. 22, Mercedes-Benz Korea issued recalls for the S 63 AMG due to stalling problems. The company said that these were “voluntary recalls,” but critics said that it was a measure to end the inspection of the Ministry of Land, Infrastructure and Transport (MOLIT). Actually, the company was forced to issue recalls by the ministry. An official from the MOLIT said, “As the S63 AMG incident caused social controversy, the ministry started the investigation into the relevant model. Then, Mercedes-Benz Korea announced to issue recalls first. Since the company showed the will to recall, we did not conduct additional investigations.”
Mercedes-Benz Korea gives compensation only when it loses cases related to significant defects in the past. In November 2012, a heavy industry company initialed “N” purchased the S600L at a price of 250 million won (US$213,493) on lease. From March the next year, the car kept suffering from stalls and violent shakes while idling. Since the problems were not fixed despite several attempts at repairs, the heavy industry company demanded a refund for the car defects. However, Mercedes-Benz Korea did not accept the request. N company eventually filed a suit, and Mercedes-Benz Korea lost in the first trial. Although Mercedes-Benz Korea appealed against the decision later, it reluctantly paid back 200 million won (US$170,794) due to the recommendation for a compromise by ruling. An individual customer, surnamed Kang, followed the suit in 2010. He bought the GLK 220 on lease. Since the car failed to accelerate on highways and suffered from stalling while idling, he had the car serviced in March and October of the next year. Despite the critical defects, Mercedes-Benz Korea refused to pay compensation. After losing in the first trial, the company paid 70 million won (US$59,778).
Moreover, it is easy to find posts that criticize the attitudes of Mercedes-Benz Korea in various online car communities. Kim Pil-soo, an automotive engineering professor at Daelim University College, said, “The company should take some active measures, including refunds, to cars that repeatedly suffer from critical defects, such as stalling and inability to accelerate. The car is priced at some 200 million won [US$170,794] but its customer service remained at 20 million won [US$17,079].”
In addition, the price discrimination of various car accessories shows how Mercedes-Benz Korea neglects Korean consumers.
The sales price in the domestic market of watches, wallets, sunglasses and clothing with its logo is up to 74 percent higher than the price in the U.S. Using the brand image, Mercedes-Benz actually makes unreasonable profits. The Mercedes-Benz “business auto watch” is sold for 1.95 million won (US$1,659) in Korea, while it is sold for US$950 (1.12 million won) elsewhere. That makes it 74 percent, or 830,000 won (US$709), more expensive in the domestic market. Its women’s sports watch, called “Kruno,” is sold at 480,000 won (US$410), which is 50 percent, or 160,000 won (US$137), higher in the U.S, while the price of the AMG wallet is 57 percent, or 110,000 won (US$94) higher. Furthermore, its car models, in which there are many collectors, are 50 percent more expensive in Korea.
Kim Ki-chan, a professor of Business Administration at The Catholic University of Korea, said, “It is a typical deception that a company makes excessive profits by abusing information asymmetry. Mercedes-Benz Korea, which pursues a premium image, is lowering its brand value itself.”