Korea: Hyundai and Kia to accelerate launching SUVs and electrified vehicles

2018 production and sales expected to fall below prior-year level; GM Korea to close Gunsan Plant




Korean vehicle production in 2017 declined by 2.7% year-over-year (y/y) to 4.12 million units. Sales in Korea (excluding the imported cars) fell 2.5% to 1.56 million units. Exports from Korea also dropped 3.5% to 2.53 million units while imports increased by 3.5% to 233,000 units. According to the outlook announced by Korea Automobile Manufacturers Association (KAMA) at the end of December 2017, production in Korea for 2018 is expected to drop 0.4% y/y to 4.1 million units due to reduced domestic demand. Sales in Korea are projected to decrease for the second consecutive year and fall 1.9% y/y to 1.53 million units owing to a weakened effect from new model releases and unstable labor-management relations. Meanwhile, exports from Korea will rise 1.6% to 2.57 million units. Imports to the country are also expected to grow 9.8% to 256,000 units as VW and Audi will resume sales which were banned in the wake of the Dieselgate scandal.

In the Korean market, the Hyundai Motor Group's share expanded slightly in 2017 after a period of decline its overseas sales, however, decreased due to a strong Won and stagnant sales in China and the U.S. In China, the Group's sales plunged due to the effect of deployment of the THAAD anti-missile system in Korea. The company also faces a problem of excess production capacity. In the U.S., the Group's profits declined owing to an increase in the ratio of fleet sales and boosted incentives. The reliability of Hyundai Group vehicle quality decreased as the company issued repeated recalls for its vehicles. In 2018, the Group aims to increase its sales by launching new SUVs and electrified vehicles including the NEXO FCV and the Niro EV in global markets.

GM Korea has sustained significant losses for four consecutive years since 2014 and decided to close its Gunsan Plant to restructure operations. In the spring of 2018, the automaker agreed with its labor union on a self-help plan including a wage freeze. It also agreed with the Korean government that GM and Korea Development Bank will make further investments to revive GM Korea. As a result of these efforts, it could avoid being placed under bankruptcy protection. However, the Detroit carmaker has been aggressively addressing underperforming businesses globally and is still considering the reduction of unprofitable operations in Korea.

While Renault Samsung's sales in Korea were stagnant, its exports registered a record high in 2017 with strong sales of the flagship QM6 SUV. The automaker's global sales for 2018 are expected to be the same level as the previous year.

Ssangyong ceased production of the Chairman W, its only passenger car, in September 2017, and will focus on production and sales of SUVs, MPVs, and pickup trucks. The company has put a plan to build a new plant in China on hold due to Seoul's decision to deploy the THAAD anti-missile system. At the same time, alongside its parent company, Mahindra & Mahindra, Ssangyong has also been seeking opportunities to enter the U.S. market.

Korean vehicle production, sales, exports and imports


2013 2014 2015 2016 2017 2018
Production in Korea 4,521,429 4,524,932 4,555,957 4,228,509 4,114,913 4,100,000 1,040,971 962,803
Sales in Korea 1,383,358 1,463,893 1,589,393 1,600,154 1,560,202 1,530,000 429,417 426,583
Exports from Korea 3,089,283 3,063,204 2,974,114 2,621,715 2,530,194 2,570,000 628,172 573,852
Imports to Korea 156,497 196,359 243,900 225,279 233,088 256,000 54,966 67,405

Source: Korea Automobile Manufacturers Association (KAMA)
(Note) 1. Sales in Korea do not include imported cars.
2. 2018 outlook for production, sales and exports was announced by KAMA at the end of 2017 while that for imports was disclosed by Korea Automobile Importers and Distributors Association (KAIDA) at the end of 2017.

Related Reports:
OEM Electrification Strategies: Strengthening HVs and diversifying into EVs, PHVs, and FCVs (May 2018)
Indian Auto Expo 2018: Exhibitions from Maruti Suzuki, Hyundai/Kia, Honda, and Toyota (Feb. 2018)
Hyundai Motor: Launching the Genesis luxury brand and Ioniq green car series (May 2017)
Hyundai: Global sales fall 100,000 units for 2015 1H (Oct. 2015)
Korea aims to produce 4.6 million vehicles in 2014 (May 2014)

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