When South Korea`s President Lee Myung Bak was inaugurated in February this year, he unleashed upon the world a new slogan, "747" -a wish that the South Korean economy would soar like a Boeing 747 toward the goals of an annual economic growth of at least 7%, a doubling of per-capita GDP to US$40,000 within one decade, and a heightening of South Korea`s world economic ranking from11th place to 7th.



Lee, 66, a businessman-turned-politician, set the revival of the Korean economy as the No. 1 task of his administration. On the day after his inauguration, South Korea`s stock market rose 1.3 percent as a reflection of stock investors` confidence in the new president.

The country`s economy grew 4.9% last year, down from 5% in 2006, and some media attributed Lee`s victory in last December`s election to the weakening economy. He vowed to stimulate economic growth by creating 600,000 new jobs in his first year.

In South Korea, most industries have suffered a decline over the past few years due to weakening market demand. The car market is one of the few exceptions, and since 2006 there has been an influx into the Korean automobile industry of foreign carmakers who are optimistic about the domestic auto market there.

Mercedes-Benz, BMW, and Lexus have joined the fray, along with Audi, Volvo, Peugeot, Saab, Cadillac, DaimlerChrysler, and Volkswagen. All have aggressive marketing plans for the country.

The share of imported cars in the South Korean market is expected to grow to 5.6% this year, up from 5% in 2007 and 4.1% in 2006. Annual sales of imported cars are expected to leap 22.6% to 65,000 units this year, boosted by a growing diversity of available car models, price-discounting strategies, improved display rooms, and new sales centers.

The share of foreign automobiles in the Korean market is expected to continue growing under the new president, who has vowed to use liberalization to revive the domestic market. After signing a free trade agreement with the United States last year, South Korea wants to reach the similar agreement with more countries in the near future and will offer more incentives to encourage imports and foreign investment.

Soaring Growth

Domestic automakers, too, are playing a critical role in the Korean auto-industry boom. Hyundai, the leading domestic carmaker, has increased its annual sales and revenue targets for this year by 20% and 15%, respectively. From the original four million units, the sales goal has been upped to 4.8 million; and from 103 trillion won, the annual revenue target for this year has been hiked to 118 trillion.

This rapid growth is attributed primarily to booming production in China and India, where Hyundai`s annual output will each reach 600,000 units this year. With second factories in China and India starting production in January and April, respectively, the company predicts that its global sales might grow to 5.33 million units this year, up from 4.72 million in 2007, including three million units produced in Korea.

Hyundai`s vision is not only to expand operations, but also to boost its world ranking in terms of market reputation. After years of effort it finally saw two of its models make the "top pick" group in an American consumer report compiled by MSNBC earlier this year, the first such achievement for the Korean brand.

In the report, Hyundai`s Elantra SE small sedan and Santa Fe mid-sized sport utility vehicle ranked among the top 10 vehicles for 2008. MSNBC bases its annual car rating on road tests, safety, and reliability.

The "top pick" ranking is especially significant to the Korean auto industry, which in the past was not noted for its quality. Now the world`s fifth-largest auto maker and sixth-largest car exporter, Korea used to have an auto industry that operated primarily by assembling key parts imported from the U.S. and Japan.

Continued Boom

South Korea suffered greatly from the energy crisis of the late 1970s and the ensuing recession. The government took action in the early 1980s to alleviate the situation by implementing an "automobile industry rationalization policy" aimed at preventing excessive competition among its four major domestic carmakers: Hyundai Motors, KIA Industry, General Motors Korea, and Asia Motors. At the same time, the government suspended market liberalization in order to curb car imports.

In recent years South Korea`s auto industry has grown along with the booming domestic car market, and production volume is expected to rise by 3.4% to 4.2 million units this year. Car exports, however, may grow by only 2.1% to 2.9 million units due to the appreciation of the Korean won and the stagnant international car market. The share of exports in total production may drop slightly to 69% in 2008, down one point from 70% in 2007.

Despite soaring oil prices and the weakening of the international car market, South Korea`s domestic demand for cars is forecast to increase 6.6% to 1,300,000 units this year, thanks partly to the aggressive introduction of new models by suppliers of both domestic and foreign cars.
(by CENS)