With European car sales in the doldrums, one country's industry is booming. Richard Feast traces the rise and rise of the new 'villains' from the East
The recent successes by South Korea's car makers in Britain and the rest of Europe have sent the region's politicians and business leaders for their soap boxes. It's easy to understand their worried looks after scrutiny of the Korean sales returns. They are faced with the most determined competitors since Japan created a car industry out of the rubble of war.

With flat demand across Western Europe last year, sales of Korean cars shot up by 58 per cent over the previous year. They were up another 53 per cent in the first half of this year as overall sales rose by a gentle 5 per cent. The assault on British buyers was even more pronounced.

True, the Koreans still account for less than 2 per cent of Europe's annual 12 million new car sales. But that's an awful lot more than the number of European models selected by last year's 1.25 million Korean new car buyers - just over 4,000. This is what is exercising the Europeans and Americans. They see a re-run of an earlier "unfair trade" issue, with South Korea replacing Japan in the role of the villain.

This time, though, the Europeans have more to worry about. Two decades ago, Japanese companies such as Toyota and Datsun (now called Nissan) were offering unpleasant little boxes whose sole merits seemed to be low prices and high equipment levels. Buyers discovered only later how much more reliable they were than those made locally.The difference this time is that Korean cars are already pretty good, and getting better with every model.

Just as Japan's once-obscure Toyota and Nissan steadily became respected household names, the pushy new Korean kids on the block hope the same will happen to them. For Rover and Ford, Peugeot and Volkswagen, these are the new enemy.

Hyundai, the largest and most conservative of the country's car makers, recently launched its stylish new Tiburon coupe. It is part of a model- broadening policy that will also result in a mini-car by the end of next year and a people-carrier by 1999.

Daewoo is the hungriest of the Koreans - though the recent jail sentence handed out to its founder for bribing politicians may cramp its style. The present cars, based on old General Motors designs, will be replaced next year by three new models designed in-house. There will also be a people-carrier and Fiesta-category model later in the decade.

Kia, now owned 17 per cent by Ford, is generally regarded as the most vulnerable, though it is equally intent on renewing and broadening its range. It bought the rights to make the Lotus Elan - Korea's first roadster - and recently launched a new Omega-category Credos in Korea. The Sportage 4x4 is made under contract by Karmann in Germany. Ssang Yong, the smallest of the Korean makers, is 10 per cent owned by Mercedes-Benz. Plans call for a big production rise and an expansion beyond the present 4x4s with a version of the Mercedes E-class in 1998.

Samsung, perhaps the wealthiest of Korea's big chaebol, or industrial groups, has long nurtured ambitions to enter the car business. It recently started making lorries and will follow with cars in 1998. Initially, they will be Nissan-based, but, like other Korean companies, it plans to become self-sufficient in vehicle technology over the long term.

As well as new models, all are frenetically building factories in Korea and around the world to produce them. Hyundai, Daewoo and Samsung all want to be among the world's 10 biggest car makers by producing more than 2 million cars a year by early next century. If that happens, says the Economist Intelligence Unit, Korea's domestic and overseas car production could rank third to those of the US and Japan in a little more than a decade. And if that happens, that would make Korea's car industry bigger than Germany's. If that sounds fanciful, no one who has studied the Korean record in steel-making, ship-building and chip production pooh-poohs the car ambitions. The country, as poor as India after the Korean War, has come a very long way fast.

Worryingly for Western companies, their new Korean competitors are redefining traditional concepts of hard work and ambition. The phenomenal drive stems from the country's colonised and war-torn history. Park Sung-Hak, president of Daewoo Corporation, says: "There isn't time to walk. We have to run all the time." The Koreans' energy makes the Japanese look tardy in comparison - and Europeans and Americans positively slothful. The Koreans are collectively creating a major indigenous motor industry where none existed three decades ago. They may be following the Japanese precedent, but they're trying to do so in half the time.

Not that the advance will be without hurdles. While Korean car producers are making every effort to become more self-sufficient, they are still reliant on too much imported technology. It is the same in the component field, a potentially bigger handicap because the country lacks the large independent supplier base essential for any industry. Labour costs are increasing, and the country's trade unions are able to exercise freedoms never enjoyed under military rule. There is sporadic industrial unrest.

With limited growth in domestic demand, the only way Korean car companies can fill all their new production lines is by exports. But while exports gained a big boost when the strong yen hampered the Japanese, the Koreans are now handicapped by their own more powerful currency. At the same time, their no-holds-barred export policy is also beginning to face protectionist calls from Europe and the US.

Nevertheless, the Korean record so far makes an uncomfortable contrast with the car industry in Britain. Korea, which overtook Britain as a car maker four years ago, will this year produce 2.2 million passenger cars, compared with 1.6 million in Britain. It's not just a question of numbers, though: Korea's car makers remain independent and increasingly self-sufficient, while every one of Britain's big car companies has been taken over by an overseas company.

Search for used cars