Growing Market Reach Sends Korea Car Sales Soaring in Brazil

SAO PAULO – A weak won and growing dealer network is helping Korean auto makers boost car sales here faster than any other group.

In the last three years, Hyundai Motor Co. Ltd. has nearly doubled its dealer network from 89 showrooms to 176, a big factor in its 600% increase in deliveries. Sales totaled 77,000 vehicles through September, good for a 3.2% market share, up from 11,000 in like-2007.

By 2013, Hyundai is targeting 300 dealers in Brazil.

Kia Motors Corp. has grown its dealer body by 77 showrooms between 2007 and 2010, with sales totaling 40,000 units through September. Kia says it now has 200-220 dealers.

“If you do not have this type of structure, you will not be successful in the market,” says Sergio Reze, president of Fenabrave, the vehicle distributors’ group in Brazil. “One of the causes of the success of Kia and Hyundai was exactly the creation of a network of distributorships.”

The weak won, which has not been adjusted significantly against the dollar, also is giving the Korean manufacturers a market advantage.

General Motors do Brasil Ltda. President Denise Johnson says she is concerned about the rise of the Korean car sales, while executives at Fiat Automoveis SA complain of the “flood of imports” inundating Brazil.

Hyundai sales up 600% in Brazil from 2007 levels.

Hyundai is assembling cars here but does not have a significant parts infrastructure, unlike Fiat, GM, Volkswagen do Brasil Ltda., Ford Motor Co. Brasil Ltda., Toyota do Brasil Ltda., the French auto makers and others.

Kia left behind a bitter taste in Bahia, when it was granted an exemption from certain import taxes but never built the plant in metro Salvador it had promised in return. Ten years ago, the land was made available under favorable conditions to Ford in Camaçari, now home to the auto maker’s largest factory in the country.

Volkswagen, which has one of the largest distribution networks here at 600 dealerships, has a 21% market share, but it has been in the country for more than 52 years.

Kia Brazil President Jose Luiz Gandini says his dealers sell about 40 vehicles per month on average.

“Because there is a shortage of cars available, and out of respect to the dealers that have already opened, I cannot open more (showrooms) and start dividing profits,” he says.

By the end of the year he expects to cut the ribbon on 27 more dealerships, but after that expansion will slow until more volume is available. “If we want to open 40 more dealerships, we could do so in one week,” he says.