Honda Launches South Korean Auto Unit

SEOUL March 25, 2003; Jeongjin Lim, writing for Dow Jones reported that Honda Motor Co. of Japan announced Tuesday the launch of its Korean unit, becoming only the second Japanese automobile company to establish an entity there.

Honda already operates a motorcycle unit in Korea and that is being expanded into an automobile company, said a Honda official.

The automobile unit will eventually be capitalized at 12 billion won ($9.6 million) as Honda plans to raise another nine billion won in capital on top of three billion won capital already available.

The company will begin sales in early 2004 and aims to sell 2,000 units next year.

Honda may release the Accord midsize sedan and CR-V sport-utility vehicle in South Korea, said Katsuro Suzuki, Honda's senior managing director, at a press conference in Seoul. But he said a final decision hasn't been made.

"Honda is carefully studying which models should come to Korea first, looking at the current heavy competition in Korea's imported car market. But, certainly, we will bring models that have proven most competitive all over the world," said Suzuki.

Woo-Young Chung, president of Honda Korea Co., Honda's Korean distribution unit, later said if the models were approved they would be available from January 2004 in the Korean market.

Under the plan, Honda Korea will select a local auto dealer partner and establish showrooms and after-sales service centers later this year in two major cities, Seoul and Busan.

Honda expects the foreign car market in South Korea to make up about 5% of the total market by 2006-2007, Suzuki said.

In 2002, imported car sales in South Korea more than doubled to 16,119 units versus 7,745 units a year earlier.

Foreign cars accounted for a 1.24% share of the domestic passenger car market last year, and 3.15% of the market for cars with engines about 2,000 cc, according the Korea Automobile Manufactures Association.

"Korea will be an important point in Honda's marketing strategy to capture a bigger portion of the Asian car market in the future," Suzuki said, explaining the reason for Honda's entrance into Korea.

Honda's planned capitalization for the Korean unit is scheduled to complete in April, with no other party participating in the investment, Chung said.