Korean automakers are set to clash over control of the domestic market for luxury sedans as indicators suggest consumers may be eager to buy large cars next year despite sluggish overall car sales.

At the eye of the storm is Renault Samsung Motors, a member of the Renault-Nissan Alliance, which released its SM7 model on Wednesday along with an aggressive investment plan. Foreign carmakers, including Volkswagen, BMW and Mercedes-Benz, also plan aggressive activity in the Korean market, the second largest in Asia after Japan.

The SM7 will compete with the Grandeur XG and Ecuus of Hyundai Motor and the New Chairman of Ssangyong Motor, while GM Daewoo, which has been making impressive advances in the sale of compact and semi-compact cars, is set to bring a new luxury sedan to the Korean market within the first half of next year.

Next year will bring a new test to Hyundai and Ssangyong, which hold strong positions as the leaders in the segment for luxury cars.

Industry sources say executives of Hyundai have met to draw up countermeasures for the release of new models by competitors.

Renalt Samsung announced last week it had already received over 3,500 applications from consumers for the purchase of the SM7 in the five days following the launch of customer services for the new sedan. In its branches around the nation, consumers are lining up to get first-hand information concerning the sedan and the options available, the firm said.

The announcement came as a surprise for local carmakers, including imported car dealers, as only about 7,000 units of luxury sedans are sold per year in the domestic market. Market watchers see it as a sign that the domestic market for luxury cars will expand in the coming years as Korean drivers shift their attention from semi-compact cars to more expensive vehicles.

GM Daewoo is now preparing for a new takeoff in the expensive car market after impressive performance in the compact car market. The firm said it will bring the Statesman sedan, currently sold in Australia for some 50 million won ($47,000), to the Korean market in the first half of next year.

But the outlook for the domestic car market remains gloomy. Due to the economic slowdown, car sales are predicted to plunge some 20 percent this year to some 1 million units from a year ago, according to industry sources. The figure will be the second worst since 1998, when automakers sold only 780,000 units following the Asian currency crisis.

However, large car dealers see a silver lining. The sale of luxury sedans in the domestic market this year fell by only 13 percent, with Korean customers showing keen interest in foreign-made cars.

- Source from The Korea Times (Dec 1, 2004) -