Koreans drive hard for market share

Daewoo has rattled Britain's car sector by cutting out dealers. Paul Rodgers reports
Click to follow
The Independent Online
ONE of the worst nightmares of any new car buyer is that the next door neighbour will drive up a week later in the same model claiming he paid pounds 500 less for it. But buyers of Daewoo motors can rest easy. The Korean conglomerate, which is trying to break into the UK market with a massive advertising blitz in advance of next month's "N" registration debut, does not allow haggling.

Although derided by the company's more established competitors, Daewoo's fixed-price strategy seems to be striking a chord with the motoring public. In just three months, its Korean-built Nexia and Espero models - both derived from 1990 GM-Vauxhall designs - have secured it a spot as the 27th-largest auto- mobile marque in the UK, ahead of Chrysler and Subaru.

The giants of Britain's motor industry dismiss Daewoo's presence, but observers of the sector say the big players are keenly interested. So are their dealers, with slightly more trepidation. The campaign could revolutionise the way cars are sold around the world, putting independent retailers out of business.

But the UK's engineering sector could benefit if Daewoo built on a successful campaign by setting up an assembly line in Britain. Executives at Daewoo Cars UK are quietly lobbying their bosses in Seoul to do just that, but admit a decision will not be made in the near future.

Though less than 30 years old, Daewoo (pronounced Day-Ooh) is the world's 33rd-largest conglomerate and promotes itself, tongue in cheek, as "the biggest car company you've never heard of". Its automobile manufacturing division dates back 60 years through various owners. But until recently, the group was blocked from entering Europe under a joint-venture agreement with General Motors that expired in 1992.

Launching a new brand in the mature British car market has posed a problem for upstart manufacturers over two decades. Nissan and Toyota succeeded by building better cars, but the dominant players - Ford, Vauxhall and Rover - have since closed that gap. Companies such as Lada took the opposite approach, offering low prices and corresponding status. Mid-market launches by Hyundai and Proton, using conventional techniques, have failed to meet Daewoo's market-share target of 1 per cent within three years. So the company's UK management rewrote the rule book in a series of brain- storming sessions, culminating last summer at the Tylney Hotel near its headquarters in Rickmansworth, Hertfordshire.

Its main selling point, they decided, was to be customer service. To provide an edge in delivering on promises, it decided to eschew dealers and run its own showrooms. The company claims this has shaved 30 per cent off the retail price of its cars. Most of that saving is being handed on to customers, it says, with an attractive maintenance and repair package ranging from AA membership to a comprehensive three-year warranty. It even supplies customers with a courtesy car when it comes to collect theirs for servicing.

But the big difference is the atmosphere in its showrooms. Pushy commission- earning salesmen have been replaced by salaried advisers, who offer help only when asked. A coffee bar and children's play area make shopping for a new motor less of a chore for families. People wanting to test drive a Daewoo can call up the company and have one delivered to their door for a trial spin.

The revolutionary approach to selling cars is being pushed hard in a pounds 16m advertising campaign orchestrated by Duckworth, Finn, Grub, Waters - the London firm that promoted Pizza Hut. The warm-up began last winter with ads emphasising the size and credibility of Daewoo, followed by regional campaigns as individual sales outlets opened. During the current three- week national blitz, it has run as many as three ads in a single slot between prime-time programme segments.

The company still suffers from having a name that is difficult to pronounce and cars that are based on a five-year-old design. Critics, particularly among independent dealers, think its refusal to cut deals will lose it more sales than it will gain.

But the results so far have been impressive. In the first three months, Daewoo has gained a respectable toe-hold in the market. According to government registration statistics, it sold 1,500 vehicles in April, just short of 1,200 in May and almost 3,800 in June.

While the figures represent just 0.4 per cent of the total market, they reflect a 1.48 per cent slice of the lower medium segment and 1.26 per cent of the upper medium segment in which Daewoo is competing, making it one of the most successful brand launches in UK motoring history.

Comments