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THE INVESTOR
August 08, 2022

Market Now

Criticisms grow as car buyers are pushed to pay more on delayed orders

  • PUBLISHED :May 18, 2022 - 09:13
  • UPDATED :May 18, 2022 - 09:13
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2022 Grandeur HMG

Consumer criticisms are mounting as the country’s carmakers are unable to meet delivery deadlines due to ongoing supply shortages, and even obligating customers to pay more to get the latest edition models.

As carmakers like Hyundai Motor stop manufacturing the older versions of a vehicle when a new edition is released, customers having to wait more than a year for delivery of their cars are being pushed to buy more the expensive, newer edition of the vehicle they purchased.

“I purchased a Volvo XC60 in last April and received a notification from the carmaker that it would take 14 months to receive my car. While I’m expecting to receive my car in June, I’m worried if I’ll have to pay more for upgraded functions that I did not expect (following the launch of the newer edition),” said Kim Su-jin, a 37-year-old office worker living in Seoul.

According to industry estimates, after making an order customers are having to wait 10 to 18 months for their car to be delivered. Considering that new edition models launch every year or so, those who wait over a year are forced to pay more due to price hikes in raw materials such as chips and steel sheets.

The country’s largest automaker Hyundai Motor launched the 2022 Grandeur earlier this week. The updated model, which has no major change in its exterior appearance, is at least 880,000 won to 1.9 million won ($680-$1,400) more expensive than the previous year’s model. Functions like curtains in the back seats or safety features like highway assist have been added.

Kia has also launched a new edition of the K8 earlier this month. The 2023 K8 costs 630,000 won more than last year’s model.

The price of Mercedes-Benz’ popular E-Class 250 AV has been also raised to 67.3 million won this year from last year’s 64.5 million won. The carmaker cited increased prices of raw materials.

“A delay in vehicle delivery mainly caused by chip shortages are making customers carry the burden. But it’s only the beginning of ‘carflation,’ as the price of new cars are expected to climb even higher considering the global market situation (of supply shortages),” said Lee Dong-hon, an executive director at Hyundai Motor Group’s industry think tank HMG Business Research center.

Carmakers say they have been seeking ways to alleviate the burden on consumers.

“Due to continuously rising production costs in terms of securing auto parts, we had to increase the price. But to minimize the burden on customers, we added functions that can minimize road noise as well as enhanced safety features,” Renault Korea said after unveiling the 2023 XM3. The newer edition, which cost 18.6 million won and was released in March this year, comes equipped with new functions like lane keeping assist. The price has been bumped up by 1.1 million won from the previous year’s model.

Some customers are even opting to get rid of some functions to speed up delivery. According to a Hyundai Motor dealership in Seoul, Kia’s flagship model EV6 can be received in 18 months once the order is made, but this can be shortened by 2 to 3 months if the navigation option is omitted.

Meanwhile, a consumers’ association said a legal hurdle in the Korean law has led to inconvenience.

According to the Fair Trade Commission’s contract on new car sales, those who sell a vehicle can deliver it to the buyer based on its updated condition. Buyers must then pay more or unilaterally cancel the contract.

“It’s a one-way, arrogant and authoritarian attitude toward customers because they can raise the price through small changes to existing models like options or trim adjustment. They should take responsibility for the delay in delivery and do more than just notifying customers on raised prices,” said Citizens United for Consumer Sovereignty, which is demanding changes in the related law.

By Kim Da-sol (ddd@heraldcorp.com)

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