The Tesla Brand in Korea: Behind the Mystique


In a recent article here, I made the point that in the wake of the car trade imbalance, as U.S carmakers seek more share in a Korean market that prefers German makes, there is one American brand that may steer the Korean preference in their direction. That brand is Tesla.

Why Tesla?

One, Korean customers are increasingly looking to buy “green”, environmental-friendly vehicles. Substantial government incentives have driven up sales both in domestic Korean carmakers’ hybrid, plug-in, and electric vehicles and well as in imports.

Second, the demand continues for a more luxurious class of import cars. Top brands have included BMW, Mercedes, Lexus, Audi, Jaguar, and Porsche. Additionally, a number of “supercars” are also popular –Aston Martin, Maserati, Ferrari, Rolls Royce, Bentley, Lamborghini, and Bugatti.


 

Tesla captures what we see unfolding as an ever-growing demand for upmarket goods and product in Korea. This consciousness also means a global repositioning of Korean brands with Korean brands hoping to be seen as premium and among the world’s leading consumer goods

From a cultural perspective, consumables can tell us much about a society. Many Koreans see luxury goods as status markers. In part, this is rooted in Neo-Confucian society that reaches back 600 years.

Traditionally Korea was a status-conscious society. For the elites this was manifested in a wide range of indicators from treasured Celadon pottery to refined behavior, ritual robes, distinct cuisine and table manners.

Tesla’s Korean outlet in Cheongdam-dong, Gangnam. (Forbes)


 

Today, the former rigid class structure no longer dominates. Instead, class distinction and status are more determined by one’s education, employment, job position, and personal income. Furthermore, we have seen considerable upward social mobility within Korea— a direct result of the nation’s economic successes.

The demand for luxury, premium goods and products has gone hand and hand with the upward mobility. In fact, these (most often Western) luxury items have taken on the role of status markers. This list can include designer eyeglasses, handbags and watches, as well as ties, scarfs, belts, name brand clothing and, of course, premium cars.

Adding to the mix, the tech-heavy content of Tesla caters nicely to Korean techno-lust and early adopter mindset.

Although some Koreans have shown concern over this desire for pricey goods, in the eyes of many Korean customers, the more expensive and rare, the more desirable the brand. These consumers equate value with a high price tag.

Tesla pricing for the Model S 90D starts at 121 million Won (about US $107,000). In addition to the Model S sales, Tesla has been taking pre-orders for the Model X and the Model 3, although the time frames for their actual launch have yet to be fixed. The Tesla Model X is a full-size crossover SUV.

The Model 3 is aimed at the mass market and retail deliveries are scheduled to begin by late 2017. Together, these new vehicles will sell in Korea at price points between 40 and 130 million Won (about US $35,600 and 115,700 respectively).

Buyers of Tesla cars in Korea could receive subsidies from the government as early as September after the Ministry of Environment announced plans to scrap regulations that limit subsidies to electric vehicles that take less than 10 hours to charge.

All and all, Tesla captures what we see unfolding as an ever-growing demand for upmarket goods and product in Korea. This consciousness also means a global repositioning of Korean brands with Korean brands hoping to be seen as premium and among the world’s leading consumer goods from home appliances to electronics, and, yes, to cars.

My third point about Tesla is that in a culture often seen as conformity embodied, many feel the need to differentiate themselves.  It is this need to differentiate that Tesla captures so well, as it does in their home market — the U.S.  

Key Factors that will drive Tesla’s Success in Korea

  1. There’s a mystique about the brand. It has developed an Apple-like fan base.
  2. Adding to the mix, the tech-heavy content of Tesla caters nicely to Korean techno-lust and early adopter mindset.
  3. Buyers feel that they are ordering a one-off, special car manufactured just for them—not buying a pre-specified car off the dealer lot.

And, 4: Tesla cars soon could qualify for South Korean government subsidies. Buyers of Tesla cars in Korea could receive subsidies from the government as early as September after the Ministry of Environment announced plans to scrap regulations that limit subsidies to electric vehicles that take less than 10 hours to charge.

This change in regulations would be a huge boost for Tesla Korea.

The Challenges

Notwithstanding logistics and meeting demand with the right mix of vehicles, one huge concern that has hindered other import premium brands in the past is the aftermarket service.

Korean premium buyers have high expectations. Tesla’s competitors, such as Mercedes and BMW, have stepped up their game and opened world-class service centers with amenities. Tesla, too, will have to meet these expectations.

That said, with customer interest high and up to 6-month waits on test drives, and 3 months on delivery, Tesla’s mystique may be what is needed for an American automotive brand to truly thrive in South Korea.

Picture of Don Southerton

Don Southerton

Don Southerton provides strategy, consulting, and training to Korea-based global businesses.

 

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