China Exclusive: Hyundai scandal tests Chinese auto dealers' faith

The negative impact of the bribery scandal surrounding the Republic of Korea's (ROK) automobile manufacturer Hyundai on the Chinese market is becoming apparent.

The lack of response from Hyundai headquarters to the scandal will probably undermine global sales and, as one of the most important markets for Hyundai automobiles, China is doomed to suffer, a Chinese car dealer, who only agreed to disclose his surname as Jia, told Xinhua on Sunday.

Hyundai's Chairman Chung Mong-koo was detained on April 28 as part of an investigation into bribery allegations.

The 68-year-old is under suspicion of embezzling about 130 billion won (about 137.2 million dollars) to establish a slush fund for bribery and is believed to have caused 390 billion won (about 412.6 million dollars) worth of damage to the company's interests.

A number of Hyundai's senior executives have been arrested since the prosecutors raided the offices of the Hyundai Motor and its affiliates last month to seize evidence that Hyundai Motor Group had created slush funds worth millions of U.S. dollars to bribe government officials during the past several years.

Hyundai Motor Group is South Korea's second-largest conglomerate and controls more than 70 percent of the domestic auto market.

Official statistics show that Hyundai has so far signed 24 Chinese dealers and 85 maintenance outlets throughout the country.

Information from the company show that Hyundai has set a target of occupying more than 20 percent of the China auto market by 2010.

"The scandal, however, is a real test of our faith in the Hyundai," the dealer commented ironically.

According to the insider with the Hyundai Motor China office, the company has made very detailed plans on imports into the Chinese market, but "now the plans are on hold".

However, when facing questions about the further handling of the scandal from its Chinese partners, the Hyundai Motor China office still chooses to remain silent.

No statement can be found on the company's Website and the PR department has declined to comment on the issue.

Analysts believe the scandal has severely damaged the brand name of the Hyundai product in China, and furthermore, the slow response or no response from the Hyundai headquarters will surely worsen the situation.

It will also disrupt Hyundai's global market strategy which leads to the dealers' confusion over the future market situation, analysts predicted.

"It's just like someone getting sick - the pain in the head will affect the hands and legs", Jia said.

The panic among Chinese dealers shows that the markets between the ROK and China have become closely tied and the Chinese market has become very sensitive to any good or bad Hyundai news in the ROK, Jia said, expressing his hope that the issue could be settled "sooner rather than later" so as to reduce the negative impact "to the minimum level".

Source: Xinhua