When was the Korean car driven out of the Chinese market? Market share has fallen to 1.7%

Popular Science Apocalypse

2024-05-31 00:18Published in Yunnan

Korean cars are in full bloom in China, with a market share of up to 10%. At that time, Kia and Hyundai logos were all over the streets, but now the market share of Korean cars has dropped sharply to 1.7%.

Many South Korean media and economic experts blame geopolitical factors for this phenomenon, especially the 2017 THAAD scandal, which led to tensions between China and South Korea, which led many Chinese consumers to boycott Korean products, including cars.

However, is the fall of Korean cars really that simple? They are still not dead now, and they have repeatedly wanted to break into China's huge market and make money from the Chinese, can they succeed?

Korean car brands are unable to satisfy Chinese consumers

In the global market, Korean cars have always attracted attention for their unique design, advanced technology, and affordable prices.

However, in the Chinese market, many consumers perceive Korean cars as inferior in terms of quality and technology, lacking the sense of high-end and innovative charm. The majority of Chinese consumers believe that there is a certain gap between the brand recognition and image of Korean cars and Japanese and German cars.

Judging from the sales data, the trust of Korean cars in the Chinese market is indeed declining significantly. According to a report by the Korean Automobile Manufacturers Association, in the first quarter of 2022, the total sales volume of China's automobile market reached 6 million units, a year-on-year increase of 6.2%. At the same time, however, sales of Korean brands fell by 39.3% year-on-year, to only 94,000 units.

During the same period, the market share of Korean brands also experienced a decline, from 2.4% in 2021 to 1.6% in 2022. This data intuitively reflects the decline in Chinese consumers' trust in Korean car brands. In China, four major trends – autonomous driving, connectivity, electrification and shared mobility (ACES) – are profoundly changing the face of the global automotive industry, and Korean cars need to keep up with these trends if they are to regain their success in the Chinese market.

One of the biggest challenges faced by Korean cars in the Chinese market is their failure to fully understand and cater to the habits and preferences of Chinese consumers, especially in their branding and marketing strategies.

In terms of model technology updates, Korean cars are also slightly inferior. Compared with their competitors, Korean cars are lacking in the speed and comprehensiveness of model updates. For example, while Chinese consumers' preferences are rapidly shifting towards sport utility vehicles (SUVs), brands such as Hyundai Motor and Kia are still focusing primarily on their sedan models, reflecting their lack of understanding of Chinese consumer needs and market trends.

There are no bright spots in the technological innovation and product quality of Korean cars

One of the reasons for the decline in sales of Korean cars in the Chinese market is the frequent quality and reliability problems. This not only directly damages the brand reputation of Korean cars, but also erodes the trust of Chinese consumers. South Korean auto brands such as Hyundai and Kia are frequently subject to car recalls, which has caused great distress to Chinese consumers.

In 2020, Hyundai recalled more than 200,000 vehicles in China due to a possible engine control unit that caused the engine to stall. Such a recall not only brings direct economic losses to South Korean automakers, but more importantly, it has dealt a heavy blow to Chinese consumer trust and brand reputation.

The frequent occurrence of engine failures and other mechanical problems has also raised serious doubts among Chinese consumers about Korean cars.

In today's highly developed digital communication and social media, these quality issues tend to spread quickly and trigger negative word-of-mouth. At the same time, Chinese consumers are increasingly demanding automotive technology, expecting advanced in-vehicle technology and smart connectivity in their vehicles.

Compared to the cutting-edge infotainment systems, autonomous driving features and seamless smartphone connectivity offered by domestic brands such as BYD and NIO, South Korean car products are lagging behind in terms of technology and cannot meet consumer expectations.

Let's take Hyundai as an example. Hyundai's sales in China peaked in 2016, but then fell off a cliff. From a high of 1.14 million units in 2016 to about 570,000 units in 2020, this significant downward trend is behind the serious lag in market response and the exposure of a series of major quality problems.

In a particularly striking case, in 2019, Hyundai Motor had to recall 43,764 Santa Fe SUVs due to fuel leaks and potential fire risks that could have been caused by fuel pipe problems. Although Hyundai has also introduced some models with advanced features, it still struggles to gain an edge over fast-innovating local Chinese brands and other international competitors.

The current Chinese automotive market is extremely competitive, especially in the mid- and low-end segments. European and American brands have made steady progress with traditional cognitive advantages, while Japanese cars have occupied a place with their stable performance. Coupled with the rapid rise of China's own brands, the competitive position of Korean cars in the Chinese market is becoming more and more difficult. This is the grim reality that Korean cars face in the Chinese market.

Korean cars are significantly lagging behind in the development of the Chinese market

Today, Chinese consumers are no longer just concerned about price, but are demanding more from quality, brand and technology. However, despite such significant changes in market demand, the influence of Korean auto brands in the high-end market has not been as strong as expected, and it is difficult to meet the expectations of Chinese consumers.

Hyundai Motor, South Korea's leading automaker, for example, sold just 118,327 units in the first half of 2023, a figure that has halved from seven years ago. This data highlights the lag of Korean automakers in product updates and upgrades, and their failure to adapt to China's rapidly changing market trends in a timely manner.

According to the latest survey, more than half of Chinese consumers have shown a strong interest in high-end car deals. This group values not only luxury, but also a high pursuit of cutting-edge technology and advanced functions, which reflects their rising economic status and eager yearning for a high-quality lifestyle.

Korean car brands have long been positioned as affordable and reliable options by consumers, which has challenged them to keep up with the emerging consumer preferences in the Chinese market. Although brands such as Hyundai and Kia have a reputation for value for money in the market, in the minds of consumers, they are not synonymous with high-end luxury.

This inherent brand perception somewhat limits their appeal in the high-end market, where brand prestige often plays a decisive role. In order to break through this bottleneck, Hyundai Motor tried to break into the high-end market with its luxury brand "Genesis". Hyundai introduced Genesis to the market as an independent luxury brand, with the intention of competing with world-renowned premium brands such as BMW, Mercedes-Benz and Audi.

Although Genesis has received widespread praise in terms of quality and functionality, it is still struggling to gain a foothold in the Chinese market. Consumers' inherent impression of Hyundai as a mainstream brand has made it difficult for "Genesis" to establish a luxury brand image.

Despite its high quality, Genesis is still relatively young compared to the established luxury brands with a long history and deep prestige, lacking the brand recognition and historical accumulation. For Chinese consumers who place a high value on brand heritage and image, they tend to prefer brands that already have a solid presence in the luxury sector.

On the other hand, the success of competitors in the high-end market further highlights the inadequacy of the Korean brand strategy. German brands such as BMW, Audi and Mercedes-Benz dominate China's luxury market, winning over affluent Chinese consumers with their luxury, superior performance and cutting-edge technology. And Japanese brands such as Lexus have also managed to position themselves as reliable luxury alternatives, winning market recognition.

In addition, Chinese brands such as NIO and Xpeng are keenly grasping the trend of electric vehicles and positioning themselves as technologically advanced and high-end brands. NIO, in particular, has managed to build a strong brand identity through its innovative approach to customer service and community building, attracting the attention of a large number of consumers.

Chinese consumers' demand for automobiles is gradually shifting to a high focus on quality, brand and technology. This poses a major challenge for Korean car brands. Despite the efforts of brands such as Hyundai and Kia, Korean cars have struggled to establish a strong presence in the premium segment due to deep-rooted perceptions in the minds of consumers and fierce competition from established luxury brands.

The rise of high-end Chinese auto brands

At the same time, the rise of Chinese auto brands has exacerbated the difficulties faced by Korean brands. Chinese brands such as Geely, BYD, and Great Wall Motors have not only made significant progress in improving the quality and reliability of their vehicles, but have also continuously improved product performance through strict quality control measures and huge R&D investment.

Chinese brands such as NIO and Xpeng, in particular, have positioned themselves as leaders in automotive technology, offering a plethora of advanced features that appeal to tech-savvy Chinese consumers. These capabilities include autonomous driving capabilities, AI integration, and comprehensive EV solutions, among others. The competitive advantages of these Chinese brands further highlight the current embarrassing positioning and situation of Korean cars.

The marketing strategies of Chinese brands also pose a challenge to Korean cars. Chinese brands have skillfully leveraged digital marketing and social media to engage with consumers, building strong online communities and effectively boosting brand loyalty and trust through influencer marketing. Today, the image of Chinese brands in the minds of consumers is no longer a low-cost alternative, but a symbol of innovation and reliability.

With the increasing popularity of the digital economy, Chinese companies are actively shifting from traditional marketing activities to digital activities. This includes utilizing online platforms for advertising, sales, and customer service. Local brands are increasingly focusing on innovation and localization to meet the unique needs and preferences of Chinese consumers. For example, they are actively developing new energy vehicles (NEVs) and connected cars, and tailoring products and services to local tastes.

Chinese companies are also investing heavily in brand building to boost their visibility and reputation among Chinese consumers. They differentiate themselves in a competitive market by enhancing brand value, quality, and uniqueness through a variety of channels. This is partly responsible for the decline in sales of Korean cars in the Chinese market.

In order to increase their presence in the Chinese market, Korean brands must work hard to rebrand to change consumer perceptions. This includes highlighting its advancements in quality and technology and differentiating its high-end products from mainstream models. In addition, the focus on technological innovation, especially in areas such as electric vehicles and autonomous driving, has helped to reposition the Korean brand as a leader in automotive technology.

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