If you were in the auto market in the early 2000s in America, you probably remember Daewoo. This South Korean company has attempted to break into the North American automotive market, hoping to follow the success of Hyundai and Kai, who have found their place in American automotive culture with cars that offer performance, quality and longevity in a very affordable package.
Unfortunately, Daewoo has not shared the same success as its Korean counterparts for a myriad of reasons. But what exactly went wrong? Why did a company that had so much backing from American automaker GM fail so quickly?
Here is the story of Daewoo in America.
Daewoo before crossing the Pacific
Before Daewoo came to America, it was a large conglomerate of product divisions in South Korea. The Daewoo name itself translates to “grand universe” and they really had a lot of products sold with the Daewoo name. A few of these companies include; Daewoo Electronics, Daewoo Motors and Motor Sales, Daewoo Precision Industries, Daewoo Shipbuilding, Daewoo Securities, Daewoo Heavy Industries and Daewoo Textile to name a few.
The Daewoo Motors subsidiary was originally called “National Motors” in 1937, but eventually became a division of Daewoo in 1983 after numerous name changes and takeovers of several companies. Right after becoming known as the Daewoo, vehicles were produced that were shipped around the world, including the Pontiac LeMans, but it wouldn’t be until almost 15 years after this experimental global hatchback that a Daewoo brand car would land in America.
Daewoo reaches the United States
In 1997, Daewoo finally entered the US auto market after years of working with GM and its many branches to produce cars designed for the global market. Unlike Kia and Hyundai, two Korean automakers that achieved early success in America, Daewoo confidently decided to launch three vehicles in their first year in the United States. In contrast, Hyundai focused on the Hyundai Excel, a hatchback that sold very well as the only Hyundai available, and Kia entered the market with just the Kia Sephia and soon after, the Sportage.
The Daewoo lineup included the Nubira sedan, the Leganza midsize sedan, and the Lanos sedan and subcompact sedan. These three vehicles were aesthetically extremely similar, but they had some good options available for their price range. Even at the lower end of the Daewoo lineup, power steering, anti-lock brakes, and automatic windows were standard equipment, which was pretty impressive for any vehicle at the time. The Leganza served as the top-of-the-line Daewoo model, adding air conditioning as standard equipment to the list, along with an option for a leather interior.
Daewoo’s plan to market more than two vehicles was bold for a foreign manufacturer, but they had a radical idea to attract new customers.
Daewoo focuses on entry-level buyers
While other Korean offerings from Kia and Hyundai were marketed with the average consumer in mind, Daewoo was aimed almost exclusively at entry-level buyers, with marketing that used expressive language such as âOops! We forgot to bill you for everything! And “Used books, used furniture, used jeans, ready for something new?” Fully indicating that Daewoo was likely to be the first new car purchase for the average buyer.
Daewoo knew he was jumping into a country full of brand-loyal people, so to start in the United States, he targeted college students to work as “campus counselors.” These student independent entrepreneurs would be airlifted to South Korea to tour the Daewoo factory and learn about the business, as well as receive a loaner car in America. These workers would earn up to $ 500 in commission on any Daewoo sold with their referral, as well as a 50% off MSRP if a campus employee bought their own car.
It’s safe to say that Daewoo has invested heavily in marketing its cars differently from other companies, and only time will tell if those investments in different marketing strategies would pay off in the long run.
Daewoo Falls Way Short
Initially, Daewoo sold a decent amount of vehicles, but it wasn’t more than a fad. Sales fluctuated between 15,000 and 65,000 vehicles sold per year, with no real positive growth. Its investment in college-aged workers and targeting entry-level buyers had also failed. With most college-aged students and entry-level consumers unable to purchase a new car, it’s no surprise that this technique has failed.
With marketing failing to gain attention, Daewoo shifted its marketing towards a more mature demographic, an older consumer who just needed reliable, cheap transportation, but it was too late. Not only was the marketing halted, the overall quality of the vehicles was very poor, with many cars in need of work before the manufacturer’s warranty expired.
The end of the 90s also brought the Asian financial crisis which hit every automaker in Asia, but especially companies like Daewoo which were just starting in the United States. Along with the financial crisis, Daewoo also had a lawsuit to settle that stemmed from its college counselor program. Students who had bought a Daewoo at 50% off realized that they had to pay sales tax on the full amount of the car before the reduction, and the reduced amount of their purchase price was reported to the IRS as income that students had to pay taxes.
In 1999, just two years after its introduction, Daewoo was already underwater and by 2002 the Daewoo project was over.
A big company today
Even though the Daewoo company went bankrupt, GM later acquired the brand from Daewoo in America and continued to produce Daewoo cars under different badges. The Chevrolet Aveo, for example, was a Daewoo car owned by GM.
In 2011, Daewoo officially became the GM Korea brand, which produced quality cars such as the Chevy Sonic, the Chevy Spark, the Chevy Trailblazer, the Buick Encore and more recently the design of the battery system that powers the GMC Hummer EV.
So while Daewoo failed as a stand-alone company, it continues today as a major supplier and cog in the General Motors machine.
In case you find yourself standing next to a dilapidated old Daewoo on the road, keep in mind that without Daewoo we wouldn’t have many of the Korean-built GM cars we enjoy today!
While Korean cars aren’t known for their performance, there are some that can outperform most European sports cars – and some that suck!
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