Volkswagen, Audi Forgo Profits to Recover in Korea

Volkswagen Korea might not have had its finest hour in October.

Thomas Kuehl, president of Volkswagen Audi Korea, appeared before Korea’s National Assembly to apologize to the legislators and the people of Korea for selling vehicles rigged with emissions-cheating software that circumvented federal and local regulations.

The automakers’ image was dimmed further when the federal government completed emissions tests on selected VW and Audi models, finding them deficient and ordering a recall of 125,000-plus vehicles and levying the highest fine against an automaker in the Korean industry’s history.

But when VW experienced the anticipated sales slide of nearly 2,000 vehicles in October, dropping from 2,901 to just 947, a 67% month-on-month and 46% year-on-year decline, marketers set aggressive countermeasures.

VW reinstated or extended 5-year, interest-free financing on most models. Customers who paid cash received discounts equal to the interest savings of those who elected to sign the interest-free time payment contracts. In some cases, depending on model, the discount was as high as $16,000, according to VW sources.

As a result, VW’s November sales were up 377% from the 947 vehicles sold in October, and up 66% from prior-year.

As a result VW led all import-vehicle sales in Korea in November, with 4,517 new registrations – a record for the German marque. It pulled ahead of traditional market leader BMW Korea, which sold 4,217 vehicles, and Mercedes-Benz with 3,441.

For November, VW took 20% of Korea’s import market, followed by BMW (18%), Audi (17%) and Mercedes (15%).

While analysts are certain the transactions are profitless for the company, they are equally certain the burst in sales has come at the expense of Korean automakers Hyundai, Kia, GM Korea, Renault Samsung and Ssangyong, all of which offer select models that give the upper-tier German imports a measure of competition.

To some extent the November sales results fly in the face of nearly 2,000 VW and Audi owners who are suing the importer for damages and full refunds of various models named in the emissions-rigging scandal that are subject to recall.

November sales of all imported vehicles in Korea were up 32% month-on-month with 22,991 deliveries. This gave the foreign brands a combined 16% of the domestic market, eating into sales of their Korean rivals.

For the full year, the Korea Automobile Importers and Dealers Assn. projects sales will be up 20% from prior-year, claiming an even greater market share. The association estimates that, as a result of global economic slowdowns impacting Korea, sales growth will ease to 8.5% in 2016.