Daewoo’s U.S. Sales Strategy May Be Failing
Upstart Daewoo Motor Corp.’s ballyhooed plan to attack the American auto market without a conventional system of franchised dealers might be backfiring.
In its first three months of U.S. retailing, the South Korean auto maker has sold 1,750 cars, but only 700 were bought by members of the public, according to preliminary sales figures obtained by a respected industry trade journal.
Automotive News said in a report Monday that Gardena-based Daewoo Motor America has piled up an inventory of about 10,000 unsold cars at its ports of entry and has sold more vehicles at discount prices to its sales representatives than to customers.
Furthermore, the figures show that Daewoo has sold only 20 cars in a market it has called key to its success here: the U.S. college and university community.
The trade paper based its report on figures obtained from a source within Daewoo. Company officials would not comment on the report, but did not deny it.
Some analysts say it is still too soon to write Daewoo off, but others say the company’s strategy of selling through word of mouth appears to be failing. Daewoo uses a cadre of “advisors” who drive the company’s cars--purchased at discounts of up to 50%--and talk them up to their peers in the collegiate and Korean American communities near Daewoo’s 15 company-owned dealerships.
“It’s obvious that you have to define your brand and communicate who and what you are to your target audience,” said Dave Nathanson, head of PricewaterhouseCooper’s Detroit-based automotive consulting unit. “And as a Korean brand, Daewoo has some image concerns that need to be addressed. But it takes an effort to do that.”
Daewoo, which entered the U.S. market in September with the introduction of three models, had projected annual sales of 50,000 units within two years and without doing much advertising.
“We are a new company doing everything differently, and some things aren’t going to work as well as others,” said Bill Tucker, Daewoo’s vice president of marketing. “We’d like to be further ahead, but we are reasonably pleased. The idea was to get as many cars as possible onto college campuses as quickly as possible.”
Daewoo’s plan for the first quarter of 1999 calls for it to add a dozen company-owned stores to those it currently operates in California and eight other states and as many as 25 independent franchise dealerships in the six states that prohibit car makers to own their own dealerships. By the end of 1999, Tucker said, the company expects to have 50 corporate stores and 50 independents.
“They are going to have a tough time getting noticed in this market without doing something to make a big splash,” said analyst Dean Benjamin of AutoSource Inc. in Manhattan Beach.
