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South Korea F1 will not lure local carmakers

(Agencies)
Updated: 2010-10-18 10:44

SEOUL - South Korea is hosting its first Formula One Grand Prix this week, but the event will be missing the country's top carmakers despite their desire to boost their brands to match their stunning emergence as a global carmakers.

The premier motorsport event had been viewed as a good opportunity to transform Korean firms' dowdy image as makers of affordable cars into the premium segment, and help expand their presence in Europe, where they have a small market share.

There has been speculation that Hyundai Motor Co. <005380.KS>, one of the top global performers during the financial crisis, could signal its intent to join F1 to replace Japan's Toyota Motor <7203.T> and Honda Motor <7267.T>.

Toyota, the world's largest carmaker, and Honda both dropped out in the last two years, hit by the global economic recession and their lack of success on the track relative to the hundreds of millions of dollars ploughed into the sport.

But Hyundai Motor Group, which includes the country's number two carmaker Kia Motors <000270.KS>, and which sponsored big sports events such as the soccer World Cup and the Olympics, has ruled out speculation it would create its own F1 team.

"The Grand Prix could be a gateway to becoming a premium car brand, but Hyundai is simply not interested in Formula One," an F1 industry official told Reuters on condition of anonymity.

"It also requires long-term investment of several years at least and it's doubtful whether Hyundai has that patience."

Hyundai is striving to boost its image in the U.S. and Europe, and to expand its presence into the mid- and large-sized car segments, from its stronghold in compact cars.

"The utmost priority is to boost brand image in Europe," Chung Eui-sun, vice chairman of Hyundai Motor and son of chairman Chung Mong-koo, said at the Paris Motor Show last month.

In Europe, the Hyundai and Kia brands have a market share of just 4.5 percent as of September, although that was up from 4.1 percent a year earlier, reflecting their comparative strength in slower global market conditions.

Costly, Risky Bet

Hyundai said its weakness is the lack of brand recognition rather than with its products, but a failure by its Asian rivals with F1 has likely made it cautious splashing money on motor racing.

Toyota failed to win a single race after seven years in F1 and spent an estimated $300 million on its Cologne, Germany-based team in 2008, a figure only exceeded by Honda.

Although Honda had early successes as a team owner and an engine supplier it posted disappointing results in 2008 before withdrawing in 2009 in the wake of the global economic downturn.

The pullout of the two Japanese carmakers has shorn F1 of Asian support, leaving the sport dominated by Europe's Ferrari, Mercedes and Renault. [ID:nT151120]

Renault-Samsung, a Korean unit of France's Renault <7201.T> and one of the smallest players in Korea, is the sole automaker in Korea in F1.

Despite the prestige of becoming the newest F1 host, Korean companies seem loath to splash cash on the sport and only LG Electronics Inc. <066570.KS> is a committed sponsor.

LG, the world's number two maker of TVs and third-biggest handset vendor, dropped its sponsorship of English Premier League side Fulham this year and said it had signed with the Red Bull F1 team to "build a young and dynamic brand image."

So far at least, it seems few other companies from the Asia's fourth largest economy, share LG's enthusiasm.