After seven months of waiting, young South Korean Hwang Min-yong finally received his black Porsche Cayenne with red leather seats. The 37-year old technology businessman took his new car out for a drive on a scenic road overlooking a river near Seoul
“Porsche has been my dream car … I don’t really feel the effects of COVID-19, as my company is less affected,” said Hwang, who owns a small tech firm.
South Korea’s prompt response and successful handling of coronavirus have resulted in a sharp increase in demand for luxury cars, as wealthy people, bored from many of the pandemic’s devastating effects, want to spend unto other things, especially new vehicles.
“This year will be one of our strongest years,” Porsche Korea CEO Holger Gerrmann told Reuters on Tuesday, as the brand saw sales rise by 46 per cent to 3,433 vehicles as of January-May this year from a year earlier. That compared with 4,285 vehicles in all of 2018, and 4,204 in 2019.
The rising sales of imported luxury and premium cars display the widening economic and status gap between rich and poor in South Korea according to industry experts. South Korea has already one of the highest inequality levels among first world countries.
While the poorest 20 per cent of households saw income unchanged, the monthly average income of the wealthiest 20 per cent of households rose by 6 per cent from January to March, despite the COVID-19 outbreak.
“The strong sales are a testament to the rising consumption power of the top class despite the pandemic,” said Yang Jun-ho, an economics professor at Incheon National University.
Yang said rich people benefited from rising stock and property prices, while small store workers lost their jobs. In May, government data showed South Korea’s unemployment rate surged to its highest level in more than 10 years.
But those who can afford it see luxury cars as an alternative to buying property, dealers said.
“In the early 2000s, the price of a BMW 320 was the cost of a Gangnam apartment,” said Ro Chang-whan, a longtime dealer and exporter of used cars. “House prices have gone up enormously since and buying a car is a more realistic choice.”
From January to May this year, the sales of imported cars priced over 100 million won ($82,511) have jumped by 70 per cent to 15,667 vehicles compared with the same months last year. By contrast, sales of small cars made in Korea fell by 10 per cent from January to April, according to the latest data. Small cars are sold to the most vulnerable middle-class workers who are struggling to find their ends meet during the pandemic.
“Porsche and BMW are so popular that there are not enough of them,” said Kim Ryu-bin, a dealer of imported cars.
Korea Automobile Importers & Distributors Association data showed German luxury brand BMW sales rose 46 per cent to 21,361 vehicles from January to May this year compared to the same months last year, while Lamborghini sales quadrupled to 115 vehicles during the same period.
South Korea has topped the United States as the leading country for sales of the BMW 5 Series from January to April this year, according to BMW’s South Korean unit.
“As the virus eases quicker than expected, consumers are going ahead with purchases,” said Kim Hyo-hyun, a BMW dealer in the affluent Gangnam district of Seoul.
Lokal brands are also making noise. Sales of Hyundai’s premium sedan Genesis G80, priced at roughly $50,000, surpassed that of the $30,000 Sonata last month and hit a record high.
Despite strong demand, Kim expects to see his sales fall by one-fifth next month. This is due to manufacturing shutdowns in Europe and the US caused by COVID-19’s ongoing effects.