Korean market and trends of domestic brands: Tax breaks boosting domestic sales
Hyundai Group accelerates electrification, Renault Samsung and GM Korea’s new SUVs stimulate demand
Vehicle sales in Korea in the period January-September 2020 increased by 6.9% year-over-year (y/y) to 1.2 million units. While vehicle sales in the world were negatively impacted by the COVID-19 pandemic, domestic demand in Korea grew. This is mainly due to the reduction in the individual consumption tax on cars as one of the government’s measures to ease the impact of the COVID-19 crisis. The individual consumption tax was lowered by 70% from March to June 2020 and will be lowered by 30% from July to the end of the year. In addition to the tax cut, successive new model launches by the OEMs also raised vehicle sales in Korea.
On the other hand, exports from Korea in the first nine months of 2020 plunged 25.2% y/y, and production in the country declined by 12.6% y/y to 2.55 million units. Exports to all regions dropped as lockdowns and self-restraint in businesses have been exercised in major export destinations because of the COVID-19 pandemic. Hyundai Motor Company is cautiously optimistic about a gradual recovery of global auto demand in the second half of 2020. However, the economic recovery of emerging markets remains uncertain.
The Hyundai Motor Group averted a larger decline in its revenue due to the impact of the COVID-19 pandemic by an enhanced product mix from the launch of SUVs and Genesis luxury models. The Group is accelerating its electrification strategy in the midst of the COVID-19 crisis. It plans to release 44 electrified models by 2025 and produce a million units of EVs per year by then with an aim of holding a global EV market share of over 10%. Hyundai Motor Company launched the new EV-dedicated Ioniq brand while Kia Motors will release seven all-electric EV models.
GM Korea, in its restructuring plan, committed to manufacture two new models for the global market in Korea. In January 2020, the company started manufacturing and sales of the Trailblazer compact SUV, the first model for the global market. After the delay in the supply of parts due to the COVID-19 crisis was alleviated, GM Korea began exporting the Trailblazer to the U.S. in April 2020. The company is currently enjoying brisk sales of the SUV in both Korea and the U.S.
Renault Samsung’s production and exports have plunged as contract manufacturing of the Nissan Rogue for the North American market, which accounted for 40% of Renault Samsung’s output, terminated in March 2020. In the same month, the automaker launched the new XM3 compact SUV, which is recording strong sales. Export of the XM3 to Europe is scheduled to start in 2021.
Ssangyong has been posting losses since 2017 and recorded a net loss of KRW 102.4 billion for the third quarter of 2020 and a debt financing amount of KRW 306.9 billion at the end of June. Its parent company, Mahindra & Mahindra, announced that it would not make additional investment and would reduce its stake in Ssangyong to less than 50%. Thus, Mahindra has been looking to bring a new investor. If Ssangyong is unable to find a new investor, it may apply for statutory administration.
|Renault Samsung’s new compact SUV XM3
(Photo: Renault Samsung)
|GM Korea’s new compact SUV Chevrolet Trailblazer
Korean vehicle production, sales, exports, and imports
|Production in Korea||4,524,932||4,555,957||4,228,509||4,114,913||4,028,834||3,950,614||2,915,289||2,549,231|
|Sales in Korea||1,463,893||1,589,393||1,600,154||1,560,202||1,552,346||1,539,766||1,121,348||1,198,299|
Source: KAMA (Korea Automobile Manufacturers Association)
Note: Sales in Korea do not include imports.
Hyundai Motor Group: increasing electrified vehicle lineup with 44 models in 2025 (Jun. 2020)
Asian OEM Electrification Strategies, Including EV Product Timelines - Part 2 (Dec. 2019)
Korean market and trends of domestic brands: 2019 production forecasted to fall below 2018 level (Aug. 2019)
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