By on November 13, 2009

seoul_sungnyemun_gate

Reuters reports that Japanese manufacturers are running scared from Hyundai-Kia. A combination of a rising Yen and South Korea sealing more and more free trade agreements with other countries has helped Hyundai-Kia immensely. Of course, copying Toyota’s business model of building reliable cars at affordable prices has helped greatly, too. All this momentum from South Korea is getting Japanese car executives a little bit nervous. “I think there’s a sense of crisis in the whole (Japanese) industry,” Toshiyuki Shiga, chief operating officer at Nissan Motor. “Whether you take the Free Trade Agreements or foreign exchange policy, I get the impression that South Korea is tackling things well.”

South Korea has signed over 40 free trade agreements, almost three times as many as Japan with other Asian countries. This is probably the reason why Toyota has far more foreign factories than Hyundai-Kia. South Korea has more than 40 free trade agreements with other nations. Japan has less than a third of that number, and most of those are with other Asian countries.Whilst Japanese executives have publicly poured anger on the strong yen, the government have done nothing to intervene. At the time of writing this article, the Japanese Yen is 90 to the US dollar. A long cry from January 2008 when it was nearly 110 yen to the US dollar.

Because of the burgeoning trade South Korea is enjoying, it will almost certainly have an appreciating effect on the South Korean Won, but as Reuters puts it “Analysts say the won could gain further as South Korea’s economy stages a faster recovery, but add that foreign exchange authorities in that country are unlikely to condone an unchecked rise.”. Currency manipulations? In Asia? Who are these analysts? Detroit executives?

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33 Comments on “Is South Korea The New Japan?...”


  • avatar

    I’ll believe South Korea is the “new Japan” only after they sucessfully buy off all the American automobile review  magazines to give their cars glowing reviews – and always come up with negatives about American cars.
    Thus far, they’ve already gotten a good headstart by  having a huge trade imbalance with us.

    • 0 avatar
      jaje

      Whatever – Detroit 3 sold us trash for decades where the Japanese constantly improved their cars during the same time period.  That’s not cheating its being smart.  I wonder who spends more money in print, media advertising.  I highly bet that Detroit 3 were the biggest spenders.  A lot of people gripe when the Detroit 3 had to compete – that is why they couldn’t.

    • 0 avatar
      rockit

      No jaje, Flashpoint has a good point.   A huge trade imbalance gives anyone a major advantage.   Just look at China right now.  Detroit did sell trash but that is not the whole story; only those that want to bury their head in the sand will think otherwise.

    • 0 avatar
      wsn

      rockit, the trade imbalance is a result of D3 producing inferior products, not the cause of it.

  • avatar
    johnthacker

    I’m trying to figure out if there’s any hidden meaning to showing a picture of a famous structure in South Korea that some moron burnt down a couple years back.

  • avatar
    rockit

    South Korea the new Japan?   Nah.  Here’s why:

    1. Hyundai vehicles are still unknown for the long term.  I don’t think cars with major mechanical problems past 60,000 miles should worry Japanese execs.

    2. South Korean electronic manufacturers still manufacture on lower prices than the Japanese competition.   User experiences with LG and Samsung show for instance price is always the selling point, quality is secondary.  (Most recent example I took a chance and bought an LG fridge and it was a massive mistake..stay away from Korean appliances)

    It’s going to take longer for South Korea to prove themselves, simple as that.

  • avatar
    AndrewDederer

    The single biggest point of difference between ROK and the Japanese industry, is the nature of the market.  South Korea has gone through a couple of boom-and-busts in the auto sector already, and there is only one domestic-owned player left in the market (and they absorbed Kia).  Daewoo is a branch of GM and Saasong (sp?) is pretty much dead.

    By comparison, Japan still looks like the US, circa 1953.  One dominant force, a couple of big players, and bunch of little guys.  Unlike the US, those little guys have stuck around (except for Daihatsu, which is more or less Toyota’s Kei-car division now).   In a more perfect market, you’d expect to see mergers and foldings cutting them down to say Suzuki (on it’s Asian market-strength) and Subaru (as a sort of eastern Jeep/Land Rover ‘niche’ division).  This would boost the Japanese ”big three” quite a bit.  

    Hyundai can survive the quid pro quo of free trade agreements (including with the Japanese), because they can count on holding a big chunk of their domestic market (only Daewoo to compete with locally).  Hyundai/Kia looks dominant because it’s the last one standing.  The Japanese makers are weaker (though part of it is just appearance), because the “little guys” are still around. 

  • avatar
    menno

    Pardigm shift, the Won is not “past tense of win” but the South Korean currency. 

    I can certainly see why the Japanese are very worried.  I’ve owned three Hyundai Sonatas and two Toyota Prius’s (Prii?) and I’m actually impressed with both makes.

    But the thing is?  Out of our 2009 Sonata and 2008 Prius, I prefer the Sonata (except in one very obvious category – mpg).  The 30% off MSRP on the Sonata last May goes a hell of a long way towards offsetting the MPG difference, to say the least, especially when the Sonata (which is bigger, more comfortable and nicer all around) had a lower MSRP in the first place.  AND it was manufactured in the United States. 

    If I were the Japanese, I’d be absolutely ghostly white with terror, in fact. 

    Plus there are the Chinese coming up fast, in the other rearview mirror, too….

    Of course, there will be more room to maneuver once Generous Motors (Government Motors?) and Chrysler die off. 

    • 0 avatar
      paradigm_shift

      Yes, I was aware that the word ‘Won’ related to the currency. Its the reason I capitalized the W. The analogy I used could easily be confused, that’s my bad on the analogy front.
      I stand by everything else ‘tho.

  • avatar
    TomH

    Yesterday’s News
    Reuters may just be catching on, but Japanese automakers have long (~10 yrs or more) been looking over their shoulders at the Koreans.  Back in ’95 you could see the rapid evolution of Korean automakers and their abilities to mimic the business model that had been successful in microwaves, TVs, and athletic shoes. Early on it was part of the mindset: “if you don’t have a good enemy, invent one!” Today, the threat is a bit more obvious, but even then the cost differentials between Korean and Japanese cars were well known.

  • avatar
    GS650G

    Every year we hear about how Hyundai is unknown for the long term. Going on 10 years we have heard this. Guess what?  The market voted this year and Hyundai won. Go ahead and pay more for a Toyota,  no promise that you’ll get a better car but you will pay more. Hyundai represents value.
    And as for trade imbalance, well at least they build cars here and employ US workers. GM,Ford and whats left of Chrysler are going overseas as fast as possible
    Japan Inc had their day, now it’s someone else’s turn. Japan imports a lot of Chinese stuff too, and sells it at a huge markup to the unsuspecting consumer. That’s a bigger crime.

    • 0 avatar
      rockit

      How has the market voted? Just because Hyundai funneled lots of sales towards cash for clunkers and fleets?
      FACT: Hyundai’s are unknown for the long term (like it or not)
      FACT: Since long term is not known,  where is the value? What value?   Honda and Toyota are known for value.  Hyundai’s are simply sold on price.

    • 0 avatar
      BD

      @ rockit -

      So Mitsubishis, Mazdas, Suzukis and even now Nissans (which threw even more $ on the hood than Hyundai) aren’t sold on “price” (which, btw, is a big part of the value equation).

      Funny, I seem to recall a time not so long ago when Lexus models were sold on price.

  • avatar
    Matt51

    The Japanese are very impressive people. Artistic, friendly, creative. But so are the Koreans. Korea now has vast numbers of highly educated engineers, and Korean coal fired electricity provides much lower costs than Japan’s nuclear powered electricity. It looks like the Japanese have reason to be concerned.

  • avatar
    ra_pro

    As I said a few times before. Samsung is now clearly beating Sony in LCD/LED TVs in price and quality.  It won’t be too long before the same happens to Toyota Vis-a-vis Hyundai.

    • 0 avatar
      rockit

      If you watch technology news that is nothing new.   The South Korean government has heavily invested and subsidized the LCD and computer memory industry making it hard for others to compete.
      The LCD and automotive market are not similar so I don’t see what your point is.

  • avatar
    GS650G

    How has the market voted? Just because Hyundai funneled lots of sales towards cash for clunkers and fleets?
    FACT: Hyundai’s are unknown for the long term (like it or not)
    FACT: Since long term is not known,  where is the value? What value?   Honda and Toyota are known for value.  Hyundai’s are simply sold on price.

    FACT: Their sales are up over everyone this year.
    FACT: How long do you need? Japanese cars rusted out quick in the 80′s. They also had mechanical problems too that were not covered by their 3 year 36K warranty.
    FACT: More people are going to be buying Hyundai this year than last.

    Explain how Hyundai funneled cash towards C4C?  Secret plans? Maybe they had superior product.

    • 0 avatar
      rockit

      1. Sales are not actually, in the USA anyway (check the Hyundai wiki or other Hyundai sales charts on the web)

      2.  Toyota started selling cars in North America in the late 50′s, Honda in the late 60′s.  It took them until the early to mid 80′s to be known 100% for quality.   If Hyundai models have quality issues at 50,000-60,000 miles from the model years 02-06 then yes, i think they need A LOT more time.  No value there at all. Period.

      3. Ok, that was my fault.   I meant the C4C just make it even easier to get a Hyundai.  The cheap cars just get even cheaper!  And yes Hyundai fleet sales have risen high as well in the last few years.

  • avatar
    paradigm_shift

    Holy crap, I just saw that the author (Cammy Corrigan) is the aforementioned katiepuckrik. I thought I recognized that “writing style”.

  • avatar
    John Horner

    South Korea has already kicked Japan’s butt seriously in consumer electronics, flat screen panels and semiconductor memories.
     

  • avatar
    Tosh

    Automotive-wise, was Japan the New Germany? More so than South Korea being the New Japan, because of Japan’s tradition of craftsmanship and technology (which I don’t especially associate with Korea). I think the question is if China can become the New South Korea. I don’t think they can, because time has run out for emerging industrial nations to become successful by making copycat ICE-based vehicles.

  • avatar
    PeteMoran

    @ Nicodemus
     
    Well, I feel sure I got the gist of what Simon Butterworth was telling us late in 2006, but perhaps he was referring to the what you mention. I’m fairly certain we got shown I-Deas LHD versions too. Maybe they were never formalised.
     
    This afternoon, we took a look under my neighbours FPV F6 (great vehicle BTW, brilliant job) and couldn’t see any obvious gotcha’s that would prevent LHD, at least for the steering or pedal component positioning.

  • avatar
    don1967

    “Yeah, but they’re unproven in the long term” seems to be the last bastion for Korea deniers.
     
    That’s fine if the last Hyundai you touched was a 1998 Excel.    But have a look at a modern Sonata or Santa Fe.   Body seams are better-sealed than anything else on the market (go ahead and compare undercarriages with any Honda or Toyota… I dare ya), steel bolts are used where other carmakers use flimsy plastic clips,  and silky-smooth powertrains can pull a trailer 6,000 kilometers without burning a drop of oil.   Been there, done that.
     
    The signs of Korean quality and durability are everywhere in 2009; you just have to open your eyes.

    • 0 avatar
      rockit

      Ummm no.
       
      Hyundai cars, yes have improved.  Long term reliability is still unknown.
      Tight body seems are not a measure of long term reliability.  Silky powertrains (they are not any better than the competition) are  not a symbol of LONG TERM quality.  If I had the time I would compare undercarriages since I don’t believe that for a second.  Pulling a trailer (umm how much weight?)  only 6,000kms without burning any oil does not earn you an award for quality…sorry.
       
      Korean quality in 2009 has not been earned.  It has just been bragged by current owners who truly want to believe they made a wise choice even though the current evidence points in the other direction.

  • avatar

    At what point is the unknown known? My broker told me not to buy Microsoft stock because it was too expensive relative to its earnings.  That was in the late 80s.  People who say Hyundai is too unknown have to consider that everyone that buys one as well as their friends neighbors and coworker are now familiar with them now.  I mean do we have to wait 20 years until Hyundai is #1 around the world when it is obvious?

    • 0 avatar
      rockit

      Yea, I know friends, neighbors and co-workers who have bought Hyundai’s, and all of them have been mistakes.
      Is a 02 Accent with a slipping tranny at 65,000miles a good value?  Is a 03 Sonata at 60,000miles with constant malfunctioning alternators,  suspension problems and now slipping transmission a testament of quality?  How about an 03 Tiburon with all those problems?  That same great quality?
       
      Wow…#1 around the world?  Aren’t we getting ahead of ourselves here?  Before that can even happen long term quality has to be proven and it just hasn’t been. Period.

      • 0 avatar
        Newyokie

        rockit, are you a japanese exe? you seem to refute any praises on korean product on this board. 
        kidding aside, i know a few people who are actually buying second hyundais after their initial lease is up or for their second cars.  They seem to be very happy after their first hyundais. 
         

        • 0 avatar
          rockit

          No exec here.
          Hyundai’s have improved very much but not at the point many are bragging about.
          The people I know that have Hyundai’s bought them pre-owned (2-3 years after when new) and they are not known for quality, that’s for sure.
          Leasing a car does not prove its long term quality.  Japanese makes proved quality over many years, not on a lease.

  • avatar
    geozinger

    As more of a Detroit fan than either a Korean or Japanese fan, it’s hard not to notice the increase in the numbers of Hyundais and Kias, at least in my neighborhood. H-K has been issuing some very nice well priced cars recently. A co-worker has a Sonata V6 that is in many ways much nicer than many other cars that I’ve seen recently, including my own Pontiac and another coworker’s Fusion. 
    I am smitten with the new Kia Koup (Koupe? I hate the spelling), which looks better than any of the other compacts out there and makes me wish GM (or any of the other domestics) would come up with something similar. There are a couple of other cars from H-K that I really like, the Accent and the Elantra and Elantra Touring. I really like the idea of a hatchback the size of the Elantra, and wish more companies would market similar styles here in the US.
    In the US, there is no other Korean branded carmaker other than H-K, so all of this talk about Korea being the new Japan is a little inaccurate, IMO. With the influx of so many imports (of all kinds) coming from the Asia Pacific ring, I think many folks have Asian name fatigue and don’t really ascribe a particular nationality to a given name anymore, not as much as years ago when the Japanese products came to market and had decidedly different names than domestic products. Additionally, the Chinese are hot on the trail, and I suspect it won’t be long before someone figures out how to import cars here from India as well. Then will we be asking if India is the new South Korea?
     

  • avatar
    shiney2

    Hyundais are better looking, cheaper to buy and repair, and at least as reliable as anything coming out of Japan. If I were a Japanese builders looking at the US market, I would be very afraid.

  • avatar
    don1967

    Rockit, you might have missed my point, which was that the signs of quality are there in 2009. Just because you don’t have the time to look at them does not mean they do not exist.

    • 0 avatar
      rockit

      I haven’t missed the point at all.  None of the things you mentioned guarantee long term reliability.  In 2009 nothing has changed quality wise from 30 years ago.  A well built car (or anything for that matter) is well built.

      It took the Honda and Toyota 25+ years to be fully known for quality. That quality was proven by old Civics, Accords, and Corolla’s which after 10 years hit 300,000kms (sometimes much more) with few problems.

      That is a reputation for quality which is earned by experience, not fantasy.


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