Diesel Reigns in Korea as Volkswagen Scandal Ebbs

A temporary blip last fall caused by consumer reaction to the Volkswagen emissions-rigging debacle notwithstanding, diesel is champion in Korea.

Diesels accounted for roughly half of the combined car and SUV sales racked up in 2015 by Korea’s five domestic automakers: Hyundai, Kia, GM Korea, Ssangyong and Renault Samsung.

In the surging import sector, now seen as threatening by all of the local automakers, the diesel take rate was 68.8%.

Imports grew 24.2% over 2014, with 243,900 vehicles sold compared with 196,359. Diesels accounted for 167,793 of last year’s deliveries.

Remarkably, Korea’s top imported vehicle was a Volkswagen diesel, the Tiguan 2.0L TDi BlueMotion, which tallied 9,467 sales.

In October, when VW’s Korea sales plunged 67.4%, with just 947 vehicles sold compared with 2,901 in September, analysts expected the automaker’s fortunes would continue to crater. Indeed, legislators and government officials still are mulling criminal charges against VW and Audi executives.

But VW Korea and sister company Audi Korea countered with a spurt of promotions, and the November rebound was phenomenal.

VW sales shot up to a single-month high of 4,517, claiming 19.7% of the import segment. It was a rise of 377% over the dismal October result and a 65.6% gain over the 2,727 vehicles sold in November 2014, when VW held 16.1% of the segment.

Despite the emissions-cheating furor and negative press, VW finished the year with 35,778 deliveries, up 16.5% year-over-year. The automaker’s full-year share of the import segment was 14.7%, within shouting distance of the 15.6% share claimed in 2014.

With diesels accounting for roughly two-thirds of all imports into Korea in 2015, the Tiguan was followed by the Audi A635, which sold 7,049 units, and BMW’s 520d, which sold 6,640.

BMW Edges Mercedes for Diesel Sales Title

BMW sold the most diesel models overall with 47,877 deliveries, up 19.2% year-on-year and good for 19.6% of the import market.

Mercedes-Benz was close behind with 46,994 sales, up 33.5%, and 19.3% of the segment.

VW was in third place with its 14.7% market share, shadowed by Audi, which logged sales of 35,538 units, just 240 short of its volume-brand parent’s tally. Audi gained 17.7% over 2014 sales and took 13.3% of the 2015 import segment.

In fifth place was Ford Sales Service Korea with 2015 sales of 10,358 vehicles, a year-over-year hike of 25.3%, giving the U.S. automaker 4.3% of Korea’s import segment.

With the VW emissions scandal still unfolding, in December Ford introduced both a diesel variant of its compact Focus with a 120-hp, 1.5L TDCi engine, and its first-ever diesel compact SUV, the Kuga (Escape) with a 180-hp, 2.0L TDCi mill, 6-speed dual-clutch transmission and numerous high-tech safety, performance and convenience features. Imported from Germany, the Kuga’s Korean pricing begins at 39.4 million won ($32,760).

Korea beyond doubt is a vital marketplace for import leaders BMW and Mercedes-Benz. It is the eighth-largest global market for both brands and in some cases models sold in Korea outpace sales in China, Europe and the U.S.

Both market leaders say they will achieve unspecified double-digit growth in an imported-vehicle market that is projected to grow 8.5%, to 255,000 units, in 2016.

The Korean Automobile Importers and Distributors Assn. stated when making that forecast it had presented the most conservative estimate, noting fallout from the VW scandal had made it difficult to predict diesel demand. The 2015 sales numbers show the fiasco did not harm sales, not even for VW.

Downplaying Diesel’s Downside

BMW Group Chairman Harald Krueger underscored the importance of the Korean market when, unlike many other global automakers’ CEOs, he opted to travel to Korea instead of appear at the North American International Auto Show in Detroit in January.

Krueger flew to Seoul to meet with and praise his 4,500-employee BMW Korea contingent, noting the automaker achieved its sixth consecutive global sales record in 2015.

“BMW Korea has played an important role in this success,” he said. “In only 15 years sales have risen from less than 2,000 to more than 55,000” including Mini.

Numerically, fewer BMW diesels were sold in 2015 (33,605) than in 2014 (39,800).

However, BMW’s ratio of diesel vehicles sold in 2015 was 83.6% compared with 15.9% for gasoline. That compares with 83.1% for diesel and 15.8% for gasoline in 2014. BMW also has sold its i3 electric vehicle and i8 plug-in hybrid sports car in Korea since April 2014.

Asked about diesel power’s overwhelming popularity among BMW customers in Korea, a representative says: “BMW diesel models have excellent fuel efficiency and greater torque. Korean customers recognize the long-distance performance, high torque and sporty driving performance and excellent efficiency of the BMW diesel technology.

“BMW opened the Korean market for imported diesel cars and began to sell diesel cars in earnest in 2008. Since then, consumers who were much concerned about oil prices and ride quality began to trust the efficiency of BMW diesel cars.”

Additionally, opting for a diesel-powered BMW instead of a gasoline-engine model isn’t necessarily more expensive.

The diesel 520d M Aerodynamic retails at 63.9 million won ($53,300), nearly 8% less than the comparable gas-powered 528i M Aerodynamic costing 68.8 million won ($57,385).

Mercedes’s Challenge

After BMW’s Krueger held his Jan. 11 kickoff meeting with BMW Korea employees, Dimitris Psillakis, the CEO of rival Mercedes-Benz Korea, arrived to tout his company’s plans for 2016.

While trailing BMW by 1,083 vehicles, with 2015 sales of 46,994 units, Psillakis boasted Mercedes-Benz recorded a 33.5% sales increase over 2014, better than its three German competitors.

Mercedes-Benz Korea previously had announced 2015 sales of the S-Class totaled 10,228 units, up 120.9% from 2014 and making Korea the third-largest market for its highest-priced model, following China and the U.S.

The starting price for an S-Class vehicle in Korea is 120 million won ($102,000). Sales included 930 Maybach models that retail at up to 290 million won ($242,000). At year-end 200 customers were awaiting delivery of new Maybachs.

Psillakis says 11 new models will launch this year, including the 10^th- generation E-Class and the new GLC diesel SUV that replaces the current GLK model. He says a GLE Coupe will launch in Korea in second-half 2016.