Imported car sales have plunged in Korea. Sales in January and February dropped 17 percent compared to last year. Market watchers even say that the figure will show a larger drop in the second half of the year as the fuel tax and individual consumption tax cuts end in the first half. Sales of imported cars are more likely to post negative growth for the first time after 2016.
The number of newly registered foreign vehicles stood at 15,885 in February, down 20.3 percent from a year earlier, according to the data from the Korea Automobile Importers & Distributors Association on March 6. It is the lowest figure in 31 months after 15,730 units in July 2016.
In particular, Mercedes-Benz and BMW, which are No. 1 and 2 in the SouthKorean import car market, staggered. The vehicle sales by Mercedes-Benz plunged 41.7 percent over the year to 3,611 last month, while BMW sold 2,340 vehicles here, down a whopping 61.8 percent from a year ago. Jaguar sales dropped 71.8 percent, Ford 29.9 percent, Toyota 29.1 percent and Maserati 23.8 percent. Audi, which released an A6 gasoline model, saw its sales increase 9,438 percent to 1,717 units on-year because the automaker suspended operations in February last year following an emissions cheating scandal. Lexus and Porsche sold 1,283 cars and 631 cars, respectively, up 25.8 percent and 132.8 percent from a year earlier.
Imported car brands have been offering discounts from the beginning of the year. Mercedes-Benz is offering large-scale discounts for its flagship E-Class premium sedan. The company has been discounting its prices by 3 million won to 5 million won (US$2,658 to 4,430) by car model from the end of last year and it is now carrying out a bargain marketing event which provides an additional discount if a buyer uses promotional and installment financing.
The selling price of Audi’s flagship A6TFSI sedan is set at 59 million won to 63 million won (US$52,282 to 55,826) but it has been lowered to around 47 million won (US$41,648). BMW has been recently offering a discount for the sixth-generation 3 Series, which has become an old model, by up to 17 million won (US$15,064). The company has reduced the discount rate of the 5 Series this year but it still shades the price by nearly 8 million won (US$7,089).
Some Ford dealers are offering a 9 million won (US$7,975) discount for the Explorer, which is the best-selling model, as the new model is to be released in the second half of the year.
Imported car brands are implementing an aggressive marketing strategy because they have a sense of crisis for plunging sales in the second half of the year. The rate of increases in imported car sales fell from 23.6 percent in October last year to 0.05 percent in November and 0.01 percent in December, while sales dropped 13.7 percent and 20.3 percent, respectively, in January and February this year.
Industry analysts believe that sales will continuously decrease from now on. The imported car market has been reorganized to mainly gasoline models due to various factors. When the government terminates the fuel tax cuts in May this year, oil prices will go up and the burden from fuel costs will increase as well. The government will also end the reduction of individual consumption taxes on cars from 5 percent to 3.5 percent in June. The policy has been implemented to boost consumption. When the individual consumption tax cuts are ended, the price of cars will increase 600,000 won to 3 million won (US$532 to 2,658) by model.