News Focus) Mitsubishi returns to Korean market: Will consumers bite?

SEOUL, Sept. 21 (Yonhap) -- For older South Koreans, the name Mitsubishi Motor
Corp. of Japan conjures up a number of images, but primarily they recall it as a
mentor of Hyundai Motor Co.
Hyundai, which now ranks as the world's sixth-largest automaker and South Korea's
largest, started producing its first homegrown model Pony in late 1975 with
engine and transmission technology borrowed from Mitsubishi's early version of
its Lancer subcompact car.
Before the Japanese carmaker fully terminated a long-term joint manufacturing and
technology licensing deal with Hyundai in 2003, most Hyundai-built cars were
based on Mitsubishi's engines and designs.
Still, it's not rare to see Mitsubishi's discontinued models on the streets of
Seoul, with the Japanese firm's Debonair luxury sedans being sold as the Hyundai
Grandeur until 2007. Hyundai's first sport-utility vehicle Galloper was a
rebadged model of an early generation of Mitsubishi's Pajero.
For middle-aged South Koreans, however, Mitsubishi is a reminder of nightmarish
mishaps behind the wheel.
In what many called "one of the largest corporate scandals in Japanese history,"
Mitsubishi was accused in the early 2000s of systematically covering up lethal
defects such as brake failure and clutch malfunction in its vehicles.
At that time, Mitsubishi was forced to publicly admit that it had sold more than
one million vehicles with defective parts over the past decades and recalled some
160,000 passenger cars and trucks.
The huge cover-up dealt a serious blow to Mitsubishi's brand image and sales, and
the company has continued to sputter up until now.
However, has part of concerted effort to revive the company's fortunes, starting
Monday, Mitsubishi will begin selling its Lancer Evolution sedan and Outlander
SUV in Seoul and other major cities through a joint venture with a local auto
distributor Daewoo Motor Sales Corp.
By the end of this year, Mitsubishi plans to sell the Eclipse coupe, Lancer
mid-size sedan and Pajero SUV in South Korea.
When asked by a reporter about how it will deal with its bad reputation before
starting sales of its cars in South Korea's booming market for imported vehicles,
Mitsubishi Motors Chief Executive Officer Osamu Masuko humbly replied, "I
understand negative perceptions remain among Korean consumers, but I will make my
utmost effort to improve them."
"Mitsubishi once faced a crisis due to quality problems of its vehicles, however,
I'm confident that Mitsubish has fully overcome the quality problems," Osamu, a
fluent Korean speaker, told reporters in July in Seoul.
The return of Mitsubishi to South Korea reflected the fast-growing demand for
imported vehicles here, especially for Japanese brands.
Out of some 20 foreign brands available on the Korean market, three Japanese
automakers -- Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co -- grabbed
33 percent of the market with a combined 17,633 units sold last year.
That represented a six-fold rise from sales of 2,968 cars in 2002. In addition,
the top 10 sales list of foreign brands included six Japanese models with Honda's
mid-range CR-V SUV topping the list.
Historically rooted anti-Japanese sentiment is still strong in South Korea,
especially among older generations, as Japan ruled the Korean Peninsula as a
colony from 1910 to 1945. But the painful memories are fading as younger Koreans
become increasingly open and receptive to Japanese pop culture and products.
"Sooner or later, Japanese brands will account for half of the local market for
imported cars," said Choi Jong-yeol, chief executive of Mitsubishi Motors Sales
Korea, the joint venture between Mitsubishi and Daewoo.
"Mitsubishi originally plans to sell 2,000 vehicles a year in the Korean market,"
Choi said.
Choi expects Mitsubishi to get back in the fast lane in South Korea "within one
or two years of the launch because the brand is very familiar to Korean
consumers."
Choi said his company aims to capture a five-percent share of the market for
imported cars, saying foreign automakers' market share in South Korea will
eventually rise to some 10 percent from the current six percent.
In 2008, South Korea's imported vehicle sales are likely to rise 20 percent to
more than 60,000 units, according to the Korea Automobile Importers &
Distributors Association.
Analysts say it's too early to talk of Mitsubishi slicing out a large chunk of
the domestic auto market, but Mitsubishi's entry could pick up competition
between Japanese brands and Hyundai, the local stronghold.
"Mitsubishi could cannibalize Hyundai's domestic market if it targets office
workers in their 30s and 40s with mid-range sedans for affordable prices," said
an auto industry analyst at a local brokerage in Seoul, who declined to be
identified.
The South Korean currency's weakness against the Japanese yen is helping the
Japanese carmakers drive down their prices here, the analyst said. The won fell
nearly 30 percent against the yen so far this year.
Another reason behind the rapid progress in the acceptance of foreign brands here
is that South Korean consumers have long been disgruntled they are forced to buy
Hyundai cars at higher prices than they cost overseas.
Hyundai's Genesis luxury car sells for 58.3 million won (US$47,700) in South
Korea, whereas in the U.S. it sells for $32,000.
"The attitude of consumers towards foreign cars has changed. If more affordable
foreign cars are available here, Hyundai will come under pressure to cut prices,"
said Kim Se-kwon, a 35-year-old who works at a foreign company in Seoul.
(END)