The Korean Car Industry's First Time Battle on its Home Turf
BUSAN, South Korea --This past week GM Korea announced that sales of its Chevrolet brand automobiles have risen 27 percent year-over-year in the past six months. As FTA’s are being inked with auto producing nations, Chevy’s sudden rise in sales signals the dawn of a new era for the automobile industry here. It will be interesting to watch how Korean car makers, cozy in their long protected market, react to competition on home turf.
Looking back on the country’s fifty-six years making cars raises an interesting question: Would the industry have seen a more rapid rise to its high rank on the global market if the heavily-guarded domestic market was open to foreign competition earlier? By extension, would Korean consumers in the eighties and nineties been availed to a higher quality product sooner?
The first Korean car came off the assembly line here in 1955. Not that it was much of a line --or much of a car. Yet, the “Shibal Taxi”, as it was known, put together entirely from odds and ends, including sheet metal from oil drums and leftover U.S. Army parts, hit the road in all the glory it could muster.
The "Shibal Taxi" (시발택시). Be careful saying 'shibal', it is also Korean profanity.
From that humble beginning the infant car industry meandered along at a snails-pace until 1962, when the Park Chung Hee administration set forth economic plans to transform Korea into the auto manufacturing giant it would later become.
At the onset, Korean auto-makers suffered from a dearth of advanced technology and a dismal level of productivity. This forced the industry to rely exclusively on imported components and know-how from the United States, Japan and Europe.
The Park administration was wise to capitalize on the desire of the world’s leading car companies to do business here in a newly-opened consumer market. The approach to establishing the new industry is where questions of how much faster it could have risen, by producing a better product, gets murky.
The administration first enacted strict import bans that allowed no foreign cars to be sold in Korea unless they were shipped here completely disassembled and then assembled in Korean factories. Additionally, no foreign automotive company was permitted to do market here unless partnered with the local players in Korea’s newly minted auto industry.
There was both wisdom and folly in the restrictions on foreign imports. The positive aspect was that by requiring all import cars be assembled here, the government had essentially established a national automotive hagwon; with international automotive technology delivered right to the door. This allowed the Korean industry to learn the ins and outs of assembling automobiles from the ground up.