Hyundai

The Industry in South Korea

Despite its large size, the car market in South Korea (Korea) is insufficient to sustain indigenous

automakers like Hyundai and Kia. Korea holds numerous competitive advantages in the car

industry. The country is a world center of new technology development. Korea has abundant,

cost-effective knowledge workers who drive innovations in design, features, production, and

product quality. The country also has a high savings rate, with massive inward FDI, which

ensures a ready supply of capital for carmakers to fund R&D and other ventures. Collectively,

Korea’s abundance of production factors in cost-effective labor, knowledge workers, high

technology, and capital represent key location-specific advantages.

Korean consumers are demanding, so carmakers take great pains to produce high quality

automobiles. Intense rivalry in the domestic auto industry ensures that carmakers and auto parts

producers improve products continuously.

The Korean economy is dominated by several conglomerates, called chaebols. They include

Hyundai, Samsung, LG, and SK and account for about 40 percent of Korea’s GDP and exports.

In recent years, the Korean government imposed stringent accounting controls on many of these

firms.

The government cooperates closely with the business sector, protecting some industries, ensuring

funds for others, and sponsoring still others. The government promoted imports of raw materials

and technology at the expense of consumer goods and encouraged savings and investment over

consumption. Partly due to these efforts, Korea is home to a substantial industrial cluster for the

production of cars and car parts. The nation benefits from the presence of numerous suppliers

and manufacturers in the global automotive industry.

In past years, Hyundai also benefited from a weak Korean won (Korea’s currency), making

prices for Hyundai cars cheaper for customers in Europe and the United States.