BMW caps South Korea success with $ 62 m driving school

Reuters: BMW AG’s South Korean sales have tripled since 2009 as it takes advantage of a free trade deal that gets even sweeter next month, posing a small-but-growing threat to Hyundai Motor Co ambition to sell more premium cars at home.

Hyundai, along with affiliate Kia Motors Corp, dominates South Korea with market share of about 70 percent. But Hyundai reported flat sales in the domestic market from January to April this year, whereas BMW’s South Korean sales rose 22% during the period.

The German premium automaker broke ground on its first driving centre in Asia on Tuesday, about an hour’s drive from the South Korean capital Seoul, and expects to draw more than 200,000 visitors a year. With an investment of 70 billion won ($62.05 million), the center will open next year, allowing visitors to test-drive BMW and Mini cars on a 2.6-km track consisting of six courses. Hyundai does not have such facilities in South Korea.

The fact that it chose South Korea over large Asian markets such as China and Japan, “proves how much importance BMW places on the Korean market,” Hendrik von Kuenheim, head of BMW’s Asia, Oceania and South Africa region, said at the ground-breaking event.

The tougher competition comes at a bad time for Hyundai, which is negotiating with a powerful labour union that has crippled production during weekends for about three months this year. Its shares have fallen about 10%over the past year, while BMW’s stock price is up 20%.

BMW and other foreign brands may take a bigger bite out of Hyundai’s market share over the coming year. South Korea’s tariffs on European cars with engines bigger than 1,500 cc such as BMW’s 3-series will halve to 1.6%as of July and drop to zero next year. Tariffs on U.S. imports will be phased out in 2017.

South Korea is a relatively small market, ranking 11th in global auto sales last year. Foreign car makers increased their share of the car market to 12%this year, from less than 2%in 2003. Although still modest, the foreign brands pose a growing threat to local heavyweights Hyundai and Kia.

“(The) Korean market has become one of the fastest growing markets for BMW in the world,” Kuenheim told Reuters.