Oct. 20 (Bloomberg) -- Toyota Motor Corp., the world’s biggest automaker, began sales of its namesake brand in South Korea, challenging Hyundai Motor Co. and affiliate Kia Motors Corp. in a country where they have a 72 percent market share.

Toyota will sell Camry sedans, Camry hybrids, Prius hybrids and RAV4 sport-utility vehicles, the Japanese company said today in a statement from Seoul. The carmaker has been selling its luxury Lexus brand in the country since 2001.

Toyota’s entrance into Korea, Hyundai’s most profitable market, may distract the Seoul-based automaker in the U.S., where it has won market share helped by promotions and a weaker won. Hyundai faces increasing competition at home as Korea eases trade restrictions and automakers such as Toyota look for new markets to offset plunging sales in the U.S., Europe and Japan.

Hyundai “will keep a close eye on its bigger rival for the long term,” said Chae Hee Gun, an analyst at Taurus Investment Securities Co. The Korean company’s position in its home market “is absolutely abnormal.”

South Korea’s biggest carmaker had 46 percent of the country’s 1.25 million passenger-vehicle market last year, according to the Korea Automobile Manufacturers Association. Kia, the nation’s second-biggest, controlled 26 percent.

Toyota will sell Camry models with 2.5-liter gasoline engines for 34.9 million won ($29,900). That’s pricier than Hyundai’s Sonata, which sells for between 21.3 million won and 26 million won in the domestic market.

Sonata, Camry

Toyota aims to sell 500 vehicles a month this year and raise that to 700 from next year, Taizo Chigira, president of the company’s Korean unit, said today in Seoul.

Hyundai introduced its sixth-generation Sonata last month to take on Toyota’s Camry globally as the Korean company pushes to be more than a low-cost alternative to Japanese carmakers. In the U.S., a weaker won and a stronger yen has helped the company take customers from Toyota and General Motors Co. It has boosted sales 1.3 percent amid a 27 percent plunge in the overall market.

The carmaker’s global market share reached a record 5 percent in the first half on higher sales in China and India. Domestic sales surged 61 percent in September.

“The home market has been a piece of cake for Hyundai for so long,” said Lee Jin Sik, a Seoul-based analyst at CSM Worldwide Inc. “Efforts to protect its most important, profitable market could lead to an enhancement of global competitiveness.”

The automaker has more than doubled in Seoul trading this year. It fell 1.7 percent to close at 99,300 won on the Korea Exchange while Toyota fell 1.4 percent to 3,580 yen in Tokyo.

Toyota Loss

Toyota, forecasting a 450 billion yen ($5 billion) net loss in the year to March, posted a 28 percent slump in U.S. sales this year as the biggest financial crisis since the Great Depression and job losses cut consumer spending. The company will face two more difficult years, President Akio Toyoda said in June.

South Korea opened its vehicle market to foreign brands in 1987, when only 10 imported cars were sold. Toyota’s Lexus, Honda, Bayerische Motoren Werke AG and other imported brands accounted for 6.04 percent of the market last year with sales of 61,648 vehicles.

Eventually, imported cars may take a 10 percent market share, according to Yoon Dae Sung, an executive managing director at Korea’s auto importers group.

“Toyota, Honda and other non-luxury brands will surely spur growth,” he said.

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

Last Updated: October 20, 2009 04:01 EDT