Korean car marques plan new world order

Korean marques are aggressively shaking off their cheap image to take on the more established names.

Nowhere is brand snobbery as strong as it is within the car industry. Delving into your pocket to pull out a key fob branded with a Korean car brand such as Daewoo, Hyundai or Kia has all too often been an invitation to derision, as the companies themselves freely admit.

But now the Korean marques, so long known for their cheap, practical and boring cars, are embarking on differing strategies in an attempt to build their brands and to appeal to a wider market. Relatively new to the international car market, the Koreans have managed to undercut other manufacturers, including the Japanese, but now face a potential threat from cheaper car models that are likely to emerge from the low-cost production powerhouses of China and India.

The Korean manufacturers are scrambling to move their brands upmarket ahead of these anticipated entrants from China and India, which Courland Automotive Practice consultant Chris Donkin claims will be even cheaper.

Hyundai Motor Company has undertaken a brand review and given two of its brands, Hyundai and Kia, new positioning and advertising in order to differentiate the marques. It is also seriously considering the launch of a luxury brand to compete against the prestige marques of BMW and Mercedes (MW last week).

Meanwhile, the Daewoo car marque is set to be rebranded as Chevrolet by new owner General Motors (MW March 18), which rescued the financially troubled business a couple of years ago. At the time, the world’s largest car-maker rebranded the business GM Daewoo, but is now rebadging it under its value marque in an effort to fully shake off negative associations and to make the range more aspirational.

GM Daewoo is struggling to rebuild its distribution base following the collapse of Daewoo, which left consumers briefly unable to have their cars serviced. “Like Coca-Cola with Dasani, GM may have decided that the brand wasn’t worth the grief of rebuilding,” suggests Corporate Edge chief executive Chris Wood.

So far Daewoo has staged a limited recovery in the UK, increasing sales by 62 per cent over the past 12 months to take 0.67 per cent of the market. But these figures have been eclipsed by Hyundai and Kia, which over the same period recorded increases of 18 per cent and 48 per cent, giving them 1.4 per cent and 1.1 per cent of the market respectively and putting them either side of marques such as Seat and Skoda.

But Hyundai Motor Company has grander ambitions, and has already announced its intention of overtaking groups such as Renault and PSA to become the fifth-largest global manufacturer by 2008. It is at present the eighth or ninth largest car manufacturer, depending on which figures are used.

GM appears to be equally ambitious in its plans to rebrand Daewoo to Chevrolet, a brand more associated with long, sleek gas- guzzlers than European family saloons. GM Daewoo Europe executive in charge Hardy Spranger is coy about the prospect and points out that although the rebrand has already happened in eastern Europe, Latin America and Turkey, it has yet to be officially confirmed for western Europe.

However, he talks of Chevrolet as an “aspirational” brand and refers to its European roots as a Swiss brand originally owned by industrialist Louis Chevrolet, who was bought out by GM in 1915. Spranger says: “We all think that people know about heritage, but if we stood on a street corner and asked people about the brands, we would get answers that would surprise us.”

But many in the industry are surprised by the cavalier ease with which GM approaches the brand portfolio game. Daewoo is not the only brand that has had to give way to a more aspirational marque. In the US market GM slapped Saab badges on Subaru models.

One industry source suggests anti-US sentiment may prove an impediment for Chevrolet, which is “as American as apple pie”. But he also mischievously compares the rebrand to US foreign policy: “The Americans are big and strong enough to do anything they want.”

Hyundai’s strategy for Kia could not be more different. Defining itself as “young and sporty”, Kia has Citroën and Fiat firmly in its sights, looking to tempt younger consumers to buy its cars. Korean cars, like Japanese cars, have until recently had a relatively elderly customer profile, valuing practical considerations above those of fashion and image.

However, Kia Motors (UK) managing director Paul Williams is disparaging of the promotional marketing of marques such as Citroën and Fiat, and says he wants to build the Kia brand in a way that emulates easyJet, Ikea and George at Asda. He believes there is a mid-market move away from “designer goods” and wants to appeal to consumers who may simply have different priorities, such as paying school fees. Kia’s current advertising campaign created by Mustoes for the well-received Piccanto city hatchback has the slogan “think about it” to drive home this message.

Despite the attempts to develop and separate Kia from the Hyundai brand, the advertising for the latter created by recently appointed agency VCCP also plays on value by using the phrase: “A fool and his money are soon parted. I ain’t no fool. A car first. A badge second.”

Both brands employ devices not traditionally associated with car advertising. Kia uses pastel colours and animation while Hyundai relies on plenty of text in a bid to attract the attention of a wider group of car buyers that has historically been treated to ads showing cars driving around country roads.

For Hyundai and Kia to grow, Williams says the marques must avoid cannibalising each other’s sales. Instead they must eat into the market shares of mainstream European marques.

As a result of the brand review, Kia has been designated as the lead marque for Europe, while Hyundai is to adopt a more conservative strategy focused on the US, where it has already overtaken Volkswagen in market share. However, a Hyundai spokesman strongly refutes the suggestion that the marque will play second fiddle in Europe.

Professor Garel Rhys, of the Institute of Automotive Industry Research at Cardiff Business School, believes that the Hyundai holding company is “very astute” and that whatever route it takes – whether developing Kia and Hyundai as hierarchical brands in the manner of Volkswagen’s portfolio, or as adjacent brands such as PSA’s Citroën and Peugeot – it will in effect “have two bites of the cherry”.

But there is still a long way to go in changing the image of Korean cars and products in general. Wood says: “I don’t think Korean goods have a persona. People don’t know whether to be scared of Korea or to sneer at it.”

But if GM succeeds in transforming Daewoo under the Chevrolet brand and Hyundai in turning Kia into the automotive equivalent of easyJet, that could all change.

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