As any ad guru will tell you, it's impossible to sell a second- rate product in big numbers indefinitely, no matter how clever the marketing. Daewoo is now finding this out.

Daewoo has been a massive success in the UK. In two years the Korean company has grown to take just over 1 per cent of the UK market, making it by far the fastest growing import franchise on record. It has won this success through its innovative marketing approach. Not only have its advertisements won awards but, more important, its innovative approach to selling cars - by not using dealerships staffed by commission-hungry salesmen - has encouraged many to sample a hitherto unheard-of Korean marque. Just as attractive, Daewoo offers the best after-sales package in the business, including free servicing and repairs for three years, as well as free insurance.

Trouble is, despite the upbeat ad message and the excellent after-sales support, and despite the tidal wave of publicity that has greeted Daewoo's high-profile entry to the UK market, its cars are crummy. They are merely tidied-up and tinselled old Vauxhalls. And given that the Vauxhalls in question weren't all that good 10 years ago when they were new, they have a fat chance of competing with the world's best cars today. Drive a new Peugeot or Ford or Renault or Toyota after a Daewoo, and you experience 10 years' progress (or more) in a single minute.

What's more, according to Motor Trader, the car trade magazine, 80.4 per cent of new and used car dealers in Britain would not take a Daewoo as part-exchange for another vehicle. They cite concern over residual values as the reason. At the same time, Glass's Guide, one of two "bibles" used by the trade to work out used values (the other is the CAP Black Book), has slashed 10 per cent off the prices of used Daewoos. Says editor- in-chief Arnie Fenn: "Until recently the Daewoo network had been willing to take all of its cars back into stock to protect their values, but now these used cars are finding their way on to the open market with fairly disastrous results."

CAP estimates that in an open market a Daewoo Nexia worth pounds 11,000 today would be worth, in two years and after 30,000 miles, no more than pounds 4,450.

Daewoo, which has enjoyed a honeymoon period with the press and public, is understandably concerned about the trade resistance. Alison Moran, a Daewoo spokeswoman, accuses the Motor Trader dealer survey of being full of "leading questions that encouraged a negative response. Also, after two years in the market, there are clearly more used Daewoos around, so we'd expect values to drop."

Mind you, things will soon improve. Brand-new Daewoo models, to replace the old Vauxhalls in drag, are on their way this September. While hardly revolutionary, these cars will be miles better than the current drab ware. They are also likely to hold their residual values far better in an open market than the Nexia or Espero. For Daewoo, then, the problem is about to be solved. But customers who bought Nexias and Esperos may not be so fortunate.

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