Kankoku no kuruma

When I mentioned that I thought my new DVD player was possible Chinese or Korean, I realized that I haven't really ever discussed the Koreans in great detail.

I want to start off by saying that I'm not an economist. I've got hardly any economic training, and my idea of a complex financial system is a parking meter in downtown Seattle. The sophistication with which I can correctly interpret industrial and developmental indicators is akin to how much thought I put into making toast—and my track record so far is somewhere around 1 burnt for every 3 toasted.

That said, I'm going to stick with what I know: cars.

The typical Korean crapbucket

If you were to ask me to describe, in one word, a typical traditional Korean car, I'd have a very difficult time. "Disappointing," and "embarrassing," are the most polite of about a dozen that come immediately to mind, and "distressing," and "shitbucket" follow shortly thereafter. If I had two words to express what I thought, I'd surely choose, "roadside assistance."

I admit that picking on the Koreans isn't terribly clever; they've really only been making cars since the 1990s. It's kicking dirt on the new scrawny kid. But at the same time, we need to remember that although he's new, he's still scrawny.

Korean manufacturers have been making pretty terrible cars for around 20 years. The first ones we saw in the early 1990s were conceptual knockoffs of popular Japanese favorites. The Hyundai Accent, for example, has always been a "budget"¹ alternative to the Toyota Corolla. The later Kia cars seemed to me to be almost bit-for-bit ripoffs of Hondas although, admittedly, the Rio had me flabbergasted. But I think you get the idea: there was no Daewoo counterpart to the Buick Regal, and Hyundai never attempted to rip off the Pontiac Aztek. Amen.

Strategy for expanding manufacturers

Now, I bring up what models these manufacturers make because I want to illustrate the market entry strategy for these companies. There are a million different ways to sell cars—and two million ways to sell cars to Americans. Those crazy Germans, for example, have relaunched two recent brands: Mini and Maybach. The Mini leverages itself as a low-cost kitsch BMW that happens to cost far more than similarly sized cars—but that's OK, because it's built like a BMW. Maybach does precisely the opposite by offering the world's largest bucket for rich fucks to empty their wallets into for the exclusivity of Not Owning Yet Another Mercedes. Neither of their entry strategies looks like the Koreans', which is what we'll see next.

The Korean companies have all used a very similar set of points to squeeze themselves into the worldwide market. Bear in mind that this list is intentionally a bit out of date.

• Universally family (compact, sub-compact) cars
  
• Very limited model range
  
• Complete lack of halo models
  
• Sold with very limited warantees and few options
  
• Low-reliability counterparts of other bread-and-butter automobiles
  

A familiar pattern

Those of you older than 30 will notice that this all seems very familiar. This strategy is the one that the Japanese used 20 years before the Koreans, and it's precisely the reason why I drive a 1998 Toyota Camry instead of a 1998 Dodge Dart.

The fact of the matter is that all the disparaging labels that I devised at the beginning were almost universally applied to the 1965 Subaru 360 and the 1971 Toyota Corona. Except probably roadside assistance, which wasn't really introduced until AT&T crapped out a cellphone smaller than a toaster.

Looking back, I agree wholeheartedly—Japanese cars were ludicrously executed and, compared to behemoths like the 1966 Lincoln Continental or the 1970 Dodge Challenger, had nearly no market appeal whatsoever. We had, after all, kicked their asses in double-u-double-u-two and, unlike zee Germans, were a fantastically backwards nation before we stepped in and straightened things out. We didn't take too kindly to German cars until the early 1970s, and there was no way we were going to buy some damned Hondarr from Emporer Hirohito in 1973.

Generally, people credit the oil crisis of 1974 with changing all of that. I agree, but only to the extent that it drove people unwillingly to fuel-efficient imports. I still assert that in 1975 they were fundamentally crappy cars and that not many minds were changed.

What really did it was that the Japanese finally got around to getting their shit together and figured out they could build a genuinely nice car that competed with domestic American automobiles and at a significantly lower price. Now, the Japanese realized that it was better for their market presence to build better cars than to build cheaper cars, so what this usually translated into was a richer feature list and better components, but at only a slightly lower price than Detroit's.

Of course, it really didn't help that America was in the throes of yet another self-righteous societal circle-jerk and that the unions had effectively absorbed the entire air supply that the US had to offer its ailing automakers. Neither the workers or the managers would even consider the thought of moving Good American Jobs out of the country because there really wasn't much of a competitive need. American workers were still churning out fantastic cars², after all.

The point here is that, in my opinion, the fact that the Japanese beat the Americans at the fuel economy game wasn't the deciding factor in the import boom. The Japanese gained ridiculous amounts of marketshare because they knew how to effectively manage a manufacturing company and how to outmaneuver the beasts in Detroit. Most importantly, though, they had absolutely no sense of entitlement.

Back to the present

If you want to talk timelines, I would say that 1998 was analagous to 1978 in that some nutty northeastern asian invaders were finally figuring out that if they put their asses to the glass³, they could actually outdo everyone in the market.

I'll bring us back to the list above for a moment—the one that describes the characteristics of Korean (and older Japanese) cars. Things like family car and limited model range clearly indicated that these companies are focusing on the high-volume, low-margin family car market. These aren't, traditionally, the types of cars that make a lot of money; I remember reading that Ford makes less than a thousand dollars on each Focus it sells, and that it makes just under twenty grand on each Excursion. Similarly, BMW's most individually profitable models are the halo 6 and 7 Series and the X5.

But correspondingly, the 3 Series constitutes nearly 50% of BMW sales and despite the fact that it's at the bottom of the blue-and-white model range, it's one of the company's best moneymakers.

The same thing is true of the Koreans. Hyundai, in particular, has been focused very heavily in the lower- and middle-market. They focus on making cars that develop strong and very competitive market presence. What makes this different from the Mini and Maybach (as examples) is that the middle market is very stable, largely unsusceptible to kitsch trends, and provides enough volume to really grow a small manufacturer.

You can bet good money that the heads of Hyundai, Kia, and Daewoo all understand that this is the strategy for becoming the next Toyota.

Honestly, this is all in the past—when I saw that Japan in 1978 looked a lot like Korea in 1998, I mean it. Nearly a decade later, I'm seeing very strong evidence to support the fact that the Koreans are making significant changes in their market presence.

A case study

Again, let's look back—but only a few years this time. In 1998, it seemed that all of Korean automotive engineering was embodied in one really goofy car: the Hyundai Tiburon. The 1^st-generation Tiburon has always been a favorite pick of mine for "the worst car I've ever ridden in," and evidence shows that it's been singularly responsible for no less than three dozen incidents of self-inflicted blinding.

When I actually get internet access, I'm going to post images of this thing. It really is ghastly.

Update: here it is! Aaagh, my eyes!

In contrast, I present the 2003 Hyundai Tiburon. They ... got it right. Very right. To the point that it makes me a bit embarrassed.

Now, I haven't been in one of these, so I can't really say anything about its road manners or anything of that sort. I have read that it offers an acceptable (but not spectacular) driving experience—something akin to the now-EOL'd 3G Mitsubishi Eclipse, with which it competes directly.

The turnaround

There are other examples across the board. Kia has pulled its shit together with a smaller number of examples (I have none handy) and Ssangyong, I hear, is really getting going. Admittedly, Daewoo is floundering very severely, but they have critical ties to General Motors, which looks very much like a financial version of the Titanic.

Hyundai, in particular, has made phenomenal improvements across the board in terms of both options and reliability. In the early 2000s they introduced a 10-year warranty plan which is, to my understanding⁴, really only matched by Volkswagen. The recently revised Accent is purportedly equipped with a transverse straight-6! This is genuinely exciting stuff, and five years ago I would never have expected it from a company like Hyundai.

Conclusions

I'm getting to the end, I promise.

I want to end with some speculation which makes sense if you know more details than I've provided here. So here they are.

• Korean manufacturers will continue to expand their market presence. I suspect that Kia (which is financially tied to Hyundai) will follow in their bigger brother's footsteps and start developing badge-engineered or independently developed cars of fantastic quality.
  
• Daewoo is temporarily fucked.
  
• Hyundai has been engineering a very quiet expansion for the last five years. I'm very excited to see what they're going to spin off in another five. Halo cars, proper luxury marques, etc..
  
• Despite the growth, everybody else (well, everybody except GM) is too smart to let these guys get too large. Whereas Detroit's Big Three (GM, Ford, Chrysler) were caught with their pants around their ankles in the late 1970s, Tokyo's Big Two (Toyota, Nissan) have so much developmental power and the Smaller Two (Honda, Mazda) have so much niche experience that they're going to be difficult to displace. They've all seen this act before, too, and are going to try their hardest to keep from becoming marginalized. While we saw Detroit get overtaken by Tokyo in the 1980s and 1990s, we'll only see Seoul match Tokyo in the 2000s.
  
• If they're smart, the Koreans will aim squarely at the somewhat-tipsy Americans manufacturers and launch an American-branded badge engineering program of their own cars. Part for part, the Korean cars are just as good but a whole lot cheaper. And they're making enough money off of them to actually fund next year's development cycle⁵.
  
• Once the Chinese get their shit together, everybody is fucked.
  

And I really do mean that last one. Korea is so damned developed that it really has no manufacturing advantage over anyone else—they simply have an organizational and flexibility advantage. In contrast, the Chinese can screw everyone with super-cheap labor.

So I guess that's about all I have to say about that. If you're in the market for a solid, cheap family car, I'd actually recommend Hyundai. And in the next five or ten years, I may actually buy one, too.

¹ read: crap
² see: Ford Pinto, Chevrolet Chevette, Plymouth Horizon
³ I just made that up. It's terrible.
⁴ My understanding is pretty limited at the moment. I generally verify any facts I put into a post like this, but I still don't have net access. Please ignore any errors until I'm online and check everything.
⁵ Counterexample: GM. Will I ever tire pointing this out?