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[News Focus] Unions stop Korean automakers from joining global trend to online sales

Faced with strong opposition from unionized workers, local automakers slow to launch online sale plans

Hyundai Motor’s online car purchasing platform “Click to Buy” for markets including the United States, Russia, India and Australia, but not South Korea (Screen capture from Hyundai Motor USA website)
Hyundai Motor’s online car purchasing platform “Click to Buy” for markets including the United States, Russia, India and Australia, but not South Korea (Screen capture from Hyundai Motor USA website)

The way people buy cars is changing. As people become more familiar with shopping online amid the COVID-19 pandemic, the sentimental barrier against purchasing high-value items, and even cars, online is lowering.

Seeing the changing trend, global automotive companies are moving fast to market their vehicles online, setting up online stores and coming up with online transaction systems.

The latest to do so was Peugeot, which announced Wednesday it is offering a limited number of 100 e-2008s, its electric vehicle sports utility vehicle, on Naver’s Smart Store shopping platform.

Since arriving in South Korea in 2017, Tesla has been selling its electric vehicles exclusively via its official website. In 2020, the company had its most successful year in the market yet, selling a total of 11,826 units.

BMW Korea launched its online store in December 2019. In the first half of this year, the automaker offered a total of 1,076 units of limited edition models exclusively for the online platform. Among them, 415 were sold, and the online store had more than 180,000 visits, BMW Korea said.

Volvo and Mercedes-Benz are aiming to expand their online sales portion to 80 percent and 25 percent by 2025, respectively.

Carmakers have good reasons to try to move sales online.

In 2019, when Tesla announced a shift in its sales strategy to focus primarily on online sales, its founder and the chief executive officer Elon Musk said he expected a 5 to 6 percent reduction in costs related to showroom operations and incentives for sales staffs.

Korean automakers’ dilemma

While global brands are revving up to reach customers online, Korean carmakers are lagging behind, mainly due to strong backlash from employees who fear layoffs.

When Kia, a sister company of Hyundai Motor, said it would take online preorders for its first electric vehicle, the EV6, the 3,400 sales employees affiliated with the firm’s labor union rose up to oppose it, with some threatening to go on a walkout.

According to the labor unions of Hyundai Motor and Kia, the combined number of sales employees registered as union members are 9,900.

Stung by the opposition, Kia quickly moved to assure the union members. It said the preorder process would just be a simple registration of the potential customer’s contact information, and that it does not plan to switch the sales method to online.

Over half of some 30,000 preorders -- a record figure of preorders for the company -- were made from Kia’s website. The rest were via its conventional sales channels.

Despite seeing the potential of online sales here, both Hyundai Motor and Kia are seen slow to adopt an online sales strategy, which many industry watchers say stems from their not wanting to get cross with their powerful union.

Before the COVID-19 pandemic, union strikes were an annual ritual at both of the carmakers during the wage negotiation season.

Hyundai Motor, however, confirmed on Wednesday its very first online sale plan.

A new compact sports utility vehicle, with the code name AX1, to be produced at Gwangju Global Motors automotive plant, will be sold only online, the firm said. Planned for a roll-out in the second half of this year, it would mark the first time that Hyundai Motor sells its cars online.

But the automaker stressed that the production is on a consignment basis.

The GGM plant in Gwangju, South Jeolla Province, is a joint venture manufacturing plant established to create jobs in the local region, with Gwangju city government standing as the major stockholder, and Hyundai having partial stakes.

“Except for the vehicle produced from the GGM plant, we do not have plans to launch an online purchasing platform here in Korea, for cars produced directly from our factories,” a Hyundai Motor official told The Korea Herald.

The Korean manufacturers do not lack the technology or a system to launch sales online. Hyundai Motor and Kia run the online platform “Click to Buy” outside of Korea -- in countries including the United States, Russia, Australia, India, Singapore and some European countries.

According to Hyundai, the online platform covers all the phases of the car shopping process, including providing the quotation of the product, calculating the taxes, discounts and other offers, and also the payment plan.

Other Korean manufacturers also seeing the shifting trend, are either considering, or have taken actions to launch online sales of their vehicles.

In May, GM Korea opened Chevrolet Online Shop to introducing the new Camaro SS, a sports car.

By Jo He-rim (herim@heraldcorp.com)
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