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Koreans Pimp Their Rides to Create $4 Billion Industry

By Rose Kim and Eunkyung Seo
July 24, 2014 6:00 PM EDT 9 Comments
An employee works on a customized Bayerische Motoren Werke AG (BMW) 1 Series 118d vehicle at the A-Seung Automotive Group garage in Seoul, South Korea.
Photographer: SeongJoon Cho/Bloomberg
An employee works on a customized Bayerische Motoren Werke AG (BMW) 1 Series 118d vehicle at the A-Seung Automotive Group garage in Seoul, South Korea.

Yoon Kyung Sik watches for police whenever he drives his souped-up Kia Motors Corp. (000270) Picanto from his leafy neighborhood in Seoul’s Songpa district to work at a nearby gym. He checks an Internet group that posts warnings if patrols are out in force.

Yoon’s offense: unauthorized modification of a motor vehicle. He installed a non-standard intake manifold, spoilers and a door light that flashes the Batman logo on the road. “Party Rock Anthem” and other LMFAO songs blast from woofers under the seats. The tweaks were made without following South Korean rules that require government permission for all but the most minor changes to a car’s factory design. Violators face as much as 3 million won ($2,900) in fines or even imprisonment.

“You know how some people dress up in a certain way to show their edge, their individuality? Car tuning’s just like that,” Yoon said, while showing pictures of his car on his LG Electronics Inc. (066570) G3 smartphone. “Going around in an unmodified car is like saying it’s OK to be the same as others, and I am not like that.”

Limits on car customizing are among roughly 2,200 regulations President Park Geun Hye wants to repeal or relax by 2018 to restore growth to pre-crisis levels. She’s looking to cut one-fifth of the 11,000 rules and policies deemed by a presidential commission to have a business impact, red tape that companies say limits innovation and forces them to seek opportunities elsewhere.

New Jobs

While South Korea’s car industry has grown into the world’s fifth biggest, it lacks a car-tuning scene like those that boost parts makers in the U.S. and Japan. Just making it easier for drivers to modify their cars like those in MTV’s “Pimp My Ride” and “The Fast and the Furious” film series could create a 4 trillion won industry within six years, South Korea estimates. It could boost employment in the domestic car-tuning industry to 40,000 by 2020, a fourfold increase over 2012, the most recent figures available.

“Most cars running on the streets here look pretty similar now because tuning has been strictly restricted, mostly due to safety reasons,” Son Yeung Sam, deputy director for the Ministry of Land, Infrastructure and Transport, said by phone. “This industry is full of potential in terms of creating jobs and entrepreneurial businesses.”

Drivers worldwide spent about $90 billion modifying the performance and appearance of their vehicles in 2012, according to the South Korean government. The country contributed about $444 million, or about half of 1 percent, compared with its 5.4 percent share of global auto production.

Lengthy Process

South Korean car tuners blame an approval process that requires them to pay as much as 97,000 won in fees and wait up to 10 days for permission from the Korea Transportation Safety Authority to modify their vehicles. An inspector must review any approved changes within 45 days.

In the U.S., registered parts makers self-certify that their products meet Federal Motor Vehicle Safety Standards and it’s up to drivers to make sure their modifications comply with state and federal laws. Germany allows drivers to add a wide variety of after-market parts that have been approved by the Federal Motor Transport Authority.

Park’s administration plans to promote its online application process for tuning requests and provide same-day or even automatic approval for some minor changes, such as lighting. The Korea Automobile Tuning Organization will set up a registry of approved parts under the supervision of the Transport Ministry.

The government will also start allowing some structural changes, such as putting beds in a van or converting a truck into a food cart.

Risky Pastime

Yoon, 29, a personal trainer and certified tae kwon do master with dyed-brown hair, said the bigger problem is that few people seem certain about what’s legal and what’s not.

“So, although I know it’s risky and could get me in trouble, I just make the modifications I want done,” Yoon said. He figures he has spent 2.7 million won tricking out his Picanto compact car, including adorning it with his favorite Marvel Entertainment and DC Comics characters.

The changes are part of South Korea’s second big deregulation push since the International Monetary Fund forced the country to open its economy in the wake of the late-1990s Asian financial crisis. Park’s goal is to help push the country’s average annual economic growth above 4 percent from the 3 percent of recent years.

Deregulation ranked third behind tax breaks and subsidies as a potential driver of investment, according to a Federation of Korean Industries survey of its 600 members released in March.

Added Value

“We must keep at it to see the development of a mature car-tuning industry,” said Kim Pill Soo, an automotive engineering professor at Daelim University College and an adviser to the government. “The jobs and added value will naturally follow.”

The growing interest in car tuning is visible in the popularity of television programs, such as “The Bunker,” which follows a car through the customization process, and “Top Gear Korea,” the local version of the BBC television program. The shows are slated for their fourth and sixth seasons, respectively, on CJ E&M Corp.’s XTM channel.

Companies like A-Seung Automotive Group, which customizes luxury vehicles in the upscale Seoul district lampooned in K-Pop star Psy’s viral “Gangnam Style” video, are among those most likely to benefit from the trend. On July 7, technicians inspected 98 million won in modifications to a Volkswagen AG Audi R8. The changes would, among other things, make the sports car accelerate to 100 kilometers (62 miles) per hour in 3.1 seconds, down from 3.5 seconds.

Standing Out

“There was a time when people were satisfied with just owning a premium imported car,” said Danny Lee, a company spokesman. “But now, because of increased sales of imported cars, especially in the Gangnam area, the need to customize vehicles to differentiate the owners from other Audi, Benz or Porsche owners is rising.”

Hyundai Motor Co., South Korea’s largest automaker, and affiliate Kia are catering to the demand by opening an online mall in May to sell approved after-market parts. They have each started brands -- TUIX for Hyundai and TUON for Kia -- that sell parts specially made for their own vehicles.

The rule relaxation is timely for Park Jae Hong, who expects to receive his Porsche Macan SUV in September and plans to upgrade the engine performance and change the wheels.

“Right now it’s unnecessarily difficult for an average person to get a car modified,” said Park, 33, who runs a family business importing dental equipment. “It’s human nature for someone to want his possessions to look more appealing or perform better.”

To contact the reporters on this story: Rose Kim in Seoul at rkim76@bloomberg.net; Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net; Frank Longid at flongid@bloomberg.net Frank Longid, Brendan Scott, Chua Kong Ho

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