South Koreas loss of China sales requires firms to actively advance, as anti-Korean sentime
South Korea pins hopes on China’s reopening to turn around record trade deficit
Both Hyundai and Samsung, South Korea’s respective industry leaders in automobiles and smartphones, take up only meagre portions of the immense Chinese market.
“Korean companies need to closely account for changes in the Chinese consumer market, such as the strengthening technological competitiveness of Chinese companies, changes in major consumer groups and trends, expansion of the middle class to stimulate domestic demand, and the growth of the silver industry due to ageing,” said Choi Jae-duk, the head of the Korean Chinese Relations Institute at Wonkwang University.
“We must actively advance into areas such as the transition to a digital economy, eco-friendly industries, maintenance and dissemination of public health systems, and digital technology convergence that will lead China’s future growth.”
For Hyundai, Seoul’s decision in 2017 to deploy the Terminal High Altitude Area Defence (THAAD) missile system was a definitive turning point.
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Before the decision to install the American system, despite Beijing’s repeated threats of ramifications, South Korea’s biggest carmaker had just recorded its most-ever sales in the world’s second-largest economy.
The 1.79 million cars sold in China in 2016 accounted for around 42 per cent of the total cars sold abroad by Hyundai that year, but the total accounted for only around 4 per cent of all car sales in China that year.
The still not fully tapped market potential of the massive Chinese market led the company to build a new factory in Chongqing that was completed in 2017.
But in 2018, sales dropped to 790,000, before dipping further to 439,000 in 2020 and finally to 259,000 last year, according to the China Association of Automobile Manufacturers.
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The faltering sales figures have fundamentally changed Hyundai’s presence in China. While the company had five factories at the height of its production, it began to only partially operate or shut them down in 2019, beginning by halting production at its first-ever Chinese factory in Beijing.
In 2021, the company sold its Beijing factory to Lixiang, a Chinese electric vehicle maker.
Amid continued reports in the past several years that the company was only utilising 25 per cent of its full production capability in its Chinese factories, it was reported by Korean media earlier this month that the company was considering closing another factory in Changzhou.
The trend runs contrary to the company’s performance domestically and in countries other than China. The Hyundai Motor Group, which consists of the Hyundai Motor Group and Kia, accounted for 88.59 per cent of car sales in South Korea last year.
Even in the United States, the Hyundai Motor achieved a double-digit share for the very first time last year – 37 years after the first Korean car was exported to the US.
02:29
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US, South Korea defence chiefs vow to step up drills to counter North Korea
Korean companies, though, will not withdraw from the Chinese market, as evidenced by comments made earlier this year by Hyundai Motor CEO Chang Jae-hoon, who emphasised that his firm would try to revitalise its business in China.
“This year is an important year for normalising Chinese business,” Chang said at the company’s New Year’s ceremony.
Electronics giant Samsung is facing a similar predicament. The conglomerate once occupied 20 per cent of the Chinese smartphone market, and ranked first among competitors, but in 2019 that percentage fell below 1 per cent.
Domestic smartphone brands such as Vivo, Oppo, Xiaomi and Huawei take up most of the market share, with Apple being the only international brand accounting for a meaningful share, with 18 per cent in 2022.
The South Korean government has been increasingly vigilant of public opinion online in China, as unfavourable views towards Korea often translate into real economic and political costs.
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Last year, the South Korean foreign ministry hired a service to monitor anti-Korean sentiment on major Chinese social media channels, such as Weibo and Douyin.
At the same time, Korean conglomerates have increasingly been tilting their focus to countries, including India, that have comparable market potential.
Last month, Hyundai Motor recorded its highest monthly sales in India. This came after the firm’s annual sales in the country increased by 17.5 per cent in 2022, representing a contrasting picture to plummeting sales in China.
Samsung is also putting more emphasis on the Indian market. The company announced recently that it would be producing 100 per cent of its Indian stock for its latest smartphone model, the Galaxy S23, in India. The company’s goal for 2023 is to occupy the biggest market share of smartphone sales in India.
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