Korean market and trends of domestic brands: 2019 production forecasted to fall below 2018 level

Hyundai Group to boost sales in India; Renault Samsung output to decline due to prolonged strikes

2019/08/16

Summary

 Korean vehicle production in 2018 decreased for the third consecutive year and fell 2.1% year-over-year (y/y) to 4.03 million units. Korea had been ranked fifth in vehicle production by country following China, the U.S., Japan and Germany until 2015. However, it dropped to seventh after India and Mexico overtook Korea in 2016 and 2018, respectively. Korean output decreased due to the Hyundai Motor Group shifting production to its overseas plants in Mexico and India, and GM Korea shutting down its Gunsan plant. Sales in Korea (excluding imports) declined by 0.5% to 1.55 million units and exports fell 3.2% to 2.45 million units, while imports grew to 261,000 units, up 11.8% y/y.

韓国の自動車生産・販売・輸出台数

  In 2019, competition between major vehicle producing countries will be fiercer as global demand for automobiles decreases. There are many unpredictable variables including the U.S.-China trade war and U.S. President Trump’s threat to impose tariffs on imported cars. Meanwhile, the business environment surrrounding the auto industry in Korea has been severe due to lower price competitiveness as a result of management-labor disputes and an abrupt increase in the minimum wage. While the Korean Automobile Manufacturers Association (KAMA) has not released its outlook for 2019, vehicle production is expected to fall short of the 4 million units that Korean auto industry has maintained as its minimum production level. The outlook for domestic sales and exports is also bleak. According to the Korea Institute for Industrial Economics and Trade, vehicle production in Korea is expected to fall 2.3% y/y and sales to increase by 0.7%. LMC Automotive forecasts that light vehicle sales in Korea will decline by 0.7%. And the Korea International Trade Association expects that vehicle exports from Korea will decline by 0.5%.

 Hyundai Motor Company global vehicle sales and sales revenue increased in 2018, led by its enhanced SUV model lineup, but its operating income decreased by about half due to a strong Won (KRW) and costs associated with U.S. recalls for faulty airbags. Kia Motors Corporation sold about the same number of vehicles globally y/y, but enjoyed increased sales revenue and operating income with the introduction of higher value-added models commanding higher prices. In 2019, the Hyundai Group plans to launch 13 new models from the Hyundai, Kia and Genesis brands. The Group intends to boost sales not only in major markets such as the U.S. and China, but also emerging markets including India and the ASEAN countries.

 As part of its efforts to restructure its operations, GM Korea closed its Gunsan plant, which had recorded significant losses, at the end of May 2018. GM Korea accepted USD 750 million in funding from the state-run Korea Development Bank. In exchange, GM will add production of two models, a new SUV and a new CUV for the global market, at its Korean plants, and committed to remain in the Korean market for at least ten years.

  Ssangyong ceased production of passenger cars in September 2017 and has been focusing on the manufacturing and sale of SUVs, MPVs and pickup trucks. Ssangyong continues to enjoy strong sales of the Rexton Sports pickup truck introduced in 2018 as well as SUVs including the Tivoli and G4 Rexton, posting record sales in Korea. Ssangyong was ranked third in terms of market share at 7% following Hyundai and Kia. In 2019, Ssangyong aims to increase sales by launching the new Korando C-segment SUV.

Hyundai Venue Renault Samsung XM3 INSPIRE
Hyundai Venue (a subcompact SUV to be launched in 2H 2019)
(Source: Hyundai Motor Company)
Renault Samsung XM3 INSPIRE (a concept car for the coupe SUV to be released in 1H 2020)
(Source: Renault Samsung)

 

Korean vehicle production, sales, exports, and imports

(Units)

2013 2014 2015 2016 2017 2018 Jan.-Jun. 2018 Jan.-Jun. 2019
Production in Korea 4,521,429 4,524,932 4,555,957 4,228,509 4,114,913 4,028,834 2,004,744 2,028,332
Sales in Korea 1,383,358 1,463,893 1,589,393 1,600,154 1,560,202 1,552,346 760,711 758,066
Exports 3,089,283 3,063,204 2,974,114 2,621,715 2,530,194 2,449,651 1,215,544 1,241,283
Imports 156,497 196,359 243,900 225,279 233,088 260,705 140,109 109,314

Source: KAMA (Korea Automobile Manufacturers Association)
(Note) Sales in Korea do not include imports.


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Hyundai Motor Group: advancing electrification with the Kona Electric SUV(Dec. 2018)
Korea: Hyundai and Kia to accelerate launching SUVs and electrified vehicles(May 2018)