Korean Auto Industry: Future or Doom

To try and predict the future or lack off, of the Korean Auto Industry we must first explore the past. It was a famous quote by George Santayana in The Life of Reason: "Those who do not remember the past are condemned to repeat it." And South Korea has never forgotten her past especially Japan.

Imperial Japan occupied Korea from the late nineteenth century to about 1910. During The Second World War Japan again became master of the Korean peninsula. Japan’s occupation was brutal – but at a time when Japan became a major world industrial power, and Korea learned as she suffered. The bitter memories of the occupation atrocities including the abduction of tens of thousands of Korean women carted off to serve as prostitutes for Japanese soldiers during the war still linger with Korea of today.

But as her colonial masters controlled the Korean peninsula, the Japanese way of doing business was being assimilated and mutated into the “Chaebol”. Chaebol is a Korean term for a conglomerate of many companies clustered around one parent company. Those conglomerates or Chaebol were encouraged to tailor their growth and production to meet

The crown jewel of the Korean automotive industry is Hyundai Motors. From humble beginnings in 1962 producing copies of foreign brands to an independent technology strategy in 1976 were Hyundai would buy technology from foreign sources and incorporate into it’s offerings Hyundai has seen growth and prosperity.

A Korean Chaebol can also be referred to as a form of “guided capitalism” were the government selects companies to undertake projects and channels funds from foreign loans were the Korean government guarantees repayment in the event of default. To further illustrate the South Korean’s influence on the Chaebol, it was not until 1989 that Kia Motors and Daewoo were allowed to re-enter passenger car business, for most of the 1980’s Hyundai was the only company allowed to produce passenger cars. Although Chaebols are conglomerates of many companies they are family owned and run under a tight rope. As of the year 2000 the four main Chebol are Samsung, Hyundai, Daewoo and Lucky Goldstar. The top four Chaebol have sales that account for somewhere between 40 and 45 percent of South Korea’s Gross National Product.

The Korean auto industry is both a product of timing and of an industry that has the backing and influences of the national government. If it were not for the demand created by the oil crises of the late seventies that made smaller cars more desirable in the global market Chaebol of Hyundai would not have seen the rapid growth that it did. In the eighties while Japanese cars paid duties to come into the United States, Korean cars were duty free an advantage fully recognized and exploited by Korea. To rapidly expand its economy the Korean Government has used its influence and resources to push the Korean auto industry ahead.

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