By on November 28, 2009

Taxi! Picture courtesy gotoofareast.com

South Korea’s Hyundai will spend some $800m to build a third Chinese plant, says the Nikkei [sub]. The plant will be located in Beijing along with its two existing facilities. It is targeted to come on-stream at the end of 2011, with an annual capacity of 300,000 units.

According to the Nikkei, Hyundai, together with Kia, is ranked No. 2 in the Chinese passenger car market, with a share of around 10 percent. Volkswagen is #1. The new facility should help Hyundai to close in on leader Volkswagen in the world’s largest car market.

Also as per the Nikkei, Hyundai will withdraw from the Japanese passenger vehicle market. Hyundai’s Nipponese sales are a disaster. From January-October Hyundai sold just 764 to the Japanese. Sayonara.

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20 Comments on “Hyundai Expands In China, Exits Japan...”


  • avatar
    mtymsi

    Does Japan have an imported car tariff that negates Hyundai’s price advantage?
     
    I know U.S. built cars are prohibitively expensive in Japan.

  • avatar
    forraymond

    It sounds like “free trade” works as well for them as it does for US.  Maybe, just maybe FAIR TRADE policies should be considered.

  • avatar

    Wouldn’t it be helpful to look up Japan’s imported car tariff first before prattling on …?
    Hint: http://www.jaia-jp.org/e/info/imported_car/transition.html

    Just to make sure that nothing has changed since Japan eliminated customs duties on cars in 1978, I had my Japanese wife consult Japanese customs tables, and the answer is:

    Zero.

    Homework assignment: What is the customs duty on an SUV, imported from Japan to the USA?

  • avatar
    Mrb00st

    Yeah, I mean Japanese people buying cars built in S.Korea would be sort of like US citizens buying vehicles built in Canada (Chevy Trucks, Camaros) or Mexico (Chryslers, Fords).  It would make NO SENSE.

  • avatar
    IGB

    The Japanese know a good car when they see/drive one.
    We Americans are part of the Walmart generation. Raised and fattened on genetically engineered corn and corn by products, over consuming bigger and cheaper crap by the container load.  Hyundai has a bright future here…and in China, where our crap comes from.

  • avatar
    John Horner

    Japan is an aging country with a shrinking population. Hardly a car market worth trying to break into.

  • avatar
    NN

    The Koreans and Japanese share a cultural trait…that of a “support the national economy” viewpoint amongst it’s citizens.  They will not buy comparable cars of foreign origin–and Hyundais are only comparable to their Japanese competitors, not better.

    Also, to answer Bertel’s quiz, the US applies a general 2.5% tariff on imported vehicles, including SUV’s, with NAFTA exemptions.  So your Toyota 4Runner had such a tariff.  Open-bed pickup trucks from foreign sources are privy to the infamous “chicken tax” which I believe is a hefty 37.5%.  I am a US customs broker but I don’t have my HTS in front of me here; I’m just reciting this by memory, if it serves me well enough.

    • 0 avatar
      Tosh

      I looked up “chicken tax” on wiki and bumped into a WSJ story on a Ford dirty secret: It ships all its Transit vans from Turkey (where they’re built) with rear windows and rear seats and then strips them out on arrival to avoid paying the extra tax.

  • avatar
    mtymsi

    So the conclusion is the Japanese pay more for a made in Japan vehicle vs. Hyundai or Hyundai doesn’t have the price advantage in Japan it does in the U.S.?
     
    There is obviously a logical reason Hyundai doesn’t sell in Japan, what is the reason?

  • avatar
    George B

    I think it would be fair to say Japan and South Korea do not have a friendly relationship.
     
    http://en.wikipedia.org/wiki/Japan%E2%80%93Korea_relations
     
     
    I am more surprised that Hyundai tried to sell cars in Japan than that the Japanese didn’t buy Korean cars.

  • avatar
    Forty2

    Quelle surprise. Enmity between Japan and Korea goes back centuries.

  • avatar

    There are ethnic Koreans who have lived in Japan for centuries and are not completely accepted as Japanese. I don’t know if it’s an urban legend or not but supposedly when an archaeological dig indicated that the imperial family may have originally come from Korea the dig was closed down.

  • avatar

    Folks, the attempts to explain marketing failure with ethnic phobia are usually bunk. America went for Hitler’s Volkswagen, and later for the cars of those wonderful people who have brought you Pearl Harbor. Russians value their BMWs and Benzes. The Chinese, who usually hold Japanese in lower regard than a monkey, buy Toyotas by the boatload.  Japanese buy Samsung and LG products with gusto.  Their markets are swamped with Chinese goods.
    It’s quite simple: Hyundai never had a concise value proposition for the Japanese buyer. I think NN had it best: “Hyundais are only comparable to their Japanese competitors, not better.” Or cheaper. Or whatever.

    • 0 avatar
      psmisc

      @Bertel
      “It’s quite simple: Hyundai never had a concise value proposition for the Japanese buyer. I think NN had it best: “Hyundais are only comparable to their Japanese competitors, not better.” Or cheaper. Or whatever.”

      By that logic, Hyundai should at least have a decent market share, if not a significant one.  But 764 cars for the entire year is just not right, there must be something else at play.

      I think it still has to do with culture, though it depends on the demographics.  The gadget-loving crowds in Japan tend to be the younger, more open-minded, pop music, materialistic generation, while those who can afford cars are middle-aged middle-class generation who grew up around the family-oriented, nationalistic, isolationist values.

      Japanese products do well in China mainly because they do tend to offer the best quality for the price, but still the vast majority of Chinese prefer German or American brands where they have a choice, such as in cars, which explains the market share.  Also, the Chinese attitude toward Japanese is not of the looking-down type, in fact most Chinese look up to Japanese achievements with high regards, it’s just the guilt that comes with looking up to your old bully who still bares some of his superiority complex towards you creates knee-jerking reactions.

      Russians buy German brands because Germany made a much more sincere and substantial effort to change itself after the war, and is generally well-received by its neighbours, mainly because Germany suffered a much greater loss and was left with very little room to negotiate.  Japan on the other hand surrendered sooner with much more leverage in tact, so they made deals with the Americans to dismiss many of its war criminals from trials, and the people who ran the regime largely remained in tact.  In fact, many extreme right-wings politicians who sympathize with imperialism and racial hierarchy still have significant influence today, which explains a lot of its policies of isolationism and xenophobia.  Where they opened up was usually by pressure from the Americans.

  • avatar
    don1967

    I’m with the cultural emnity theory, and suggest that the reason Samsung and LG have been exempted is that gadgets are hotter in Japan than cars.
     
    http://www.newsweek.com/id/112735

  • avatar
    GS650G

    Getting any business off the ground in Japan is a difficult task. Bringing in cars and cracking their market is even tougher. This does not surprise me as much as why Hyundai would even waste their time trying to enter Japan’s car market in the first place.

  • avatar
    charly

    Hyundai is good in making cheap, big cars. There is a very small market for big, cheap cars in Japan.

  • avatar
    no_slushbox

    The South Koreans and Chinese drive on the right (some would say correct) side of the road (steering wheel on the left side), and their entry level cars are b and c segment cars.  For Hyundai the same is conveniently true of the US.

    The Japanese drive on the left side of the road (steering wheel on the right side), and their entry level cars, with more than 1/3 of the market, are microcar kei cars.

    It doesn’t make a lot of sense for Hyundai to try to develop RHD kei cars for a dying market, when instead it can focus on LHD  b segment + cars for South Korea, the US and China.

    Especially since the Japanese have intense, non-trivial, ethnic prejudices that further complicate Hyundai’s success in Japan, especially with regard to purchases as conspicous to one’s neighbors as a car.

    It’s Japan’s loss, the Genesis Coupe, with either the I4 turbo or V6,  is better than anything that Japan makes at anywhere near the price.

  • avatar
    no_slushbox

    Re: “It’s quite simple: Hyundai never had a concise value proposition for the Japanese buyer. I think NN had it best: ‘Hyundais are only comparable to their Japanese competitors, not better.’ Or cheaper. Or whatever.”
     
    It’s definitely NOT that simple.  If Hyundai had nothing to offer buyers of Japanese cars then it would have never had any success in the US market, where the Japanese were already well established. 
     
    The truth is that 1) Hyundai doesn’t make the kei cars that 1/3 of Japanese buy, and making kei cars wouldn’t be worth its time, but, more importantly 2) the Japanese are intensely xenophobic, and even if a Japanese person isn’t intensely xenophobic he or she won’t buy a foreign car (unlike a phone or tv) out of concern than his or her neighbors are.
     
    Intensely xenophobic culture beats tariffs any day, if anyone doubts that look at Japanese auto market penetration in Europe (where the locally produced cars are so bad that the French and Italians can’t even sell theirs in the US) vs. Japanese auto market penetration in the more open minded US. 

  • avatar
    psarhjinian

    Japan is an aging country with a shrinking population. Hardly a car market worth trying to break into.Japan is an aging country with a shrinking population. Hardly a car market worth trying to break into.
     
    Yes, but it’s also a market with a policy-induced forced turnover rate and a population with a decent amount of disposable income and a willingness to buy the next new thing.  If there’s a word to describe the market, it’s “hypercompetitive”: so much so that their cast-offs have been sold effectively as new throughout APAC.  Even in recession, it’s a big market.
     
    Have a look at Toyota’s product portfolio in Japan: including Daihatsu and Hino, it’s to a level of depth, breadth and niche-exploiting madness that would make even the Germans blanche.  They own the JDM in a way that not even GM owned North America, and they absolutely, positively Do. Not. Let. Up.  Ever.  It’s hard enough for the other Japanese marques to hold ground, and only Suzuki, in a rare moment of Toyota’s not being fast enough, has managed to grow.
     
    Hyundai didn’t stand a chance, and not through any fault of their own.  They’d have to find some kind of near-profitable niche they could establish themselves in, and no such animal exists in Japan, certainly not when the domestic players are fighting to keep their heads above water.

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