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Reimport Worries Hyundai Motor

Posted April. 04, 2008 03:46,   


Hyundai Motor Co. decided to sell its 3.8-liter version of Genesis at $32,000 in the United States, a U.S. car dealer, Don Jenkins, told the Dong-A Ilbo. Jenkins came to Korea to visit the automaker’s corporate event held at Hyatt Hotel in Seoul on April 3. He told the Dong-A reporter, “I heard from the company that Genesis will sell for $32,000 in the United States and that I should be prepared.”

The same car model sells for 52.8 million won in Korea, which is 21.8 million won more expensive than in the United States. Even considering tax differences in the two countries, a Korean buying a 3.8-liter version of Genesis should pay 12.2 million won more than his counterpart in the United States. Such a large price gap is likely to trigger criticism. Also, some consumers and parallel importers are even trying to reimport Genesis sedans from the U.S. market.

○ Same Car Sells for Much Lower Price in U.S.

In order to reimport Genesis from the United States, parallel importer Choi, 45, has recently talked with U.S. car brokers and dealers and successfully asked them to provide Genesis sedans for him.

He plans to reimport around ten units of Genesis immediately after Hyundai Motor publicly announces the price for Genesis in the U.S. market. Later, he would reimport a large volume of Genesis if consumers show much interest in reimported cars.

Businessman Park, 38, who is considering buying a Genesis, decided to delay his purchase since he has been told that reimported cars will cost 10 million won less than the ones released in the Korean market. He plans to make a decision when the car company begins selling Genesis in the United States from this June and after comparing the Korean and U.S. prices.

Bulletin boards of Internet car sites and portal sites are bombarded with questions over how to reimport Genesis.

Parallel importer Choi said, “Hyundai Motor provides a 5-year guarantee on reimported Genesis, up to 100,000 kilometers. The car manufacturer gives an additional price cut of around 2 million won in the United States. Also, it cuts its price further for volume customers. Moreover, we can cut logistics costs. As a result, I think reimporting Genesis will be really profitable.”

If a consumer buys a new Genesis from a U.S. car dealer via an import agent, he has to pay 8 percent of tariff and 34.2 percent of taxes including the special sales tax, education tax and value added tax.

If the nation’s largest carmaker sets the price of 3.8-liter of Genesis at $32,000, a Korean consumer buying reimported Genesis should pay 43 million won, still 10 million won lower than the price tag for the same model released in the Korean market.

Moreover, if the won-dollar exchange rate falls further from the current 970 won per dollar level, the price gap will widen.

○ Considering Sanctions on Dealers’ Activity

Recognizing such attempts to reimport Genesis, Hyundai Motor is trying to find efficient countermeasures.

The motor company is considering measures such as providing a limited guarantee for reimported cars and putting sanctions on American car dealers who sell Genesis to Korea’s parallel importers.

The motor company initially wrote on its official Web site of Hyundai Motor America that the U.S. customers will be provided with the same guarantee in Korea under the same conditions. However, the company changed the statement this January to “no guarantee” and changed once again after a month amid mounting customer complaints.

A source from Hyundai Motor America said, “We’re really troubled since some dealers are trying to earn money by reimporting Genesis. Even though we’re trying to find measures, we’ve failed to find a silver bullet.”

If the carmaker provides a limited guarantee for reimported Genesis, it would invite harsh criticism that its decision runs counter to its own practice through which it has been providing the same guarantee for reimported cars. Critics would also say the company made such an unfair decision to protect its profit in the domestic market where the same product sells for a much higher price.

A source from the carmaker said, “If we put a higher price tag for Genesis in the United States, we could prevent reimport but have to see sales decrease. We’re really in a dilemma.”