From Expansion to Mature: Turning Point of the Korean Automotive Market

Abstract

There is no doubt that the automobile industry is going through a fundamental shift. The “Great Recession” triggered by the “subprime crisis” has affected worldwide automobile demand and prompted automobile manufacturers to form alliances and shift their focus and concentration to the emerging market, which has withstood the slump amid economic growth and government subsidies. In a context of weak global demand, major markets will see harsher price competition as key players take an aggressive stance for larger market shares. Hence, automakers will compete more fiercely than ever before for more sales and will have to fight on two major fronts: to gain a larger market share and to maintain profitability. As a result of recession, income disparity widens, as does the spending gap, triggering fears of social instability. This change in spending patterns show evidence of a “middle class squeeze”, with reflects in a stagnation of mid-range cars and an increase of the top and low range cars demand. After an expansion phase, the Korean market growth has stagnated, as the national economy remained sluggish.