South Korean vehicle manufacturers are anticipating a record year for their global operations in 2008, despite the weakening global economic environment.
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Hyundai-Kia is particularly upbeat about its global sales prospects, as it pushes on with the globalisation of its manufacturing operations. Most companies have started the year strongly, with volume growth in the first two months.
The Korea Automobile Manufacturers Association (KAMA) expects domestic vehicle production to reach 4.2m units in 2008 compared with 4.09m units in 2007. It expects reasonably strong sales growth at home – of 6.6% compared with 2007. All manufacturers are targeting higher exports, helped by a weakened won.
Hyundai bullish
Hyundai Motor expects a 19% rise in worldwide sales in 2008 to 3.11m vehicles, up from 2.6m units in 2007 – driven primarily by a 42% increase in overseas production to 1.31m vehicles, from 900,311 units in 2007.
China and India will be key in helping to increase global output, following capacity increases last year. Its operations in the USA will likely struggle this year given the overall slowdown in the country’s economy.
Strong start to 2008 for Kia
Kia Motors started the year well with a 12.7% rise in global sales to 206,120 units in the January-February period. This follows a 3.5% increase in global sales to 1,269,164 units last year. In the last two months, a moderate decline in US sales was more than offset by strong growth in China and Europe.
The company says a much stronger start to the year than previously has given it confidence over the full-year outlook, despite weakness in the North American market. It has not released a forecast for this year, but global sales should come in at least in line with 2007.
Daewoo gains in 2008 with mixed results
GMDAT continued to recover under GM ownership, with global sales rising by 23.6% in 2007 to 1,886,632 units – compared with 1,525,819 units in 2006. This reflects the significant efforts the company has made in recent years in strengthening its product range. In the first two months of the year global sales, excluding CKD exports, increased by 6.7% to 153,785 units – despite a sharp drop in domestic sales.
Renault-Samsung and Ssangyong increased production to 177,742 and 122,657 units respectively in 2007 and both are targeting sharply higher production for 2008. Renault Samsung expects global sales to be lifted by the new QM5 SUV model, for which a target of 100,000 units from domestic and export sales has been set.
Domestic sales continue recovery in 2008
The South Korean vehicle market – including sales of imported vehicles – continued to grow in January and February, with volumes rising by 3.3% to 199,365 units in the two-month period. Growth was confined to the passenger vehicle segment, with sales of trucks and buses declining sharply in this period. The Seoul motor show due to be held in April should help maintain sales momentum in the coming months.
Since the sharp volume declines in 2003 and 2004 to a low of 1.06m units – triggered by high consumer debt, the domestic vehicle market has recovered steadily year-by-year and the industry remains upbeat about the short-term prospects. With GDP growth at 5% last year, average incomes have risen – although income disparity in the country is substantial.
The vehicle market expanded by 4.9% in 2007 to 1.271m units and is forecast to grow further in 2008 – to 1.365m units. KAMA is forecasting local sales of domestic brands to reach 1.3m units this year, with new models such as the Hyundai Genesis executive car, the Kia Mohave and Renault-Samsung QM7 SUVs and the Kia Morning sub-compact car helping to drive sales.
Despite the market optimism, the weakening won, sharp rises in the cost of commodities and energy and weakening export markets could put pressure on the domestic consumer and these early forecasts may be revised downwards later on.
Hyundai-Kia dominates
With domestic sales of 625,275 units and a market share of over 49%, Hyundai inevitably has the country’s best-selling vehicles. It sold 119,133 Sonatas in 2007, 110,535 Avante and 88,430 Grandeur models.
Kia Motors’ domestic sales reached 272,330 units last year, to claim a 21.4% market share. The Bongo light truck was Kia’s best-selling domestic model with 39,946 sales, followed by the Lotze mid-sized car with 32,711 units and the Sportage SUV with 32,583.
While its export sales have grown sharply in the last few years, GMDAT’s domestic market share recovery has been more moderate, rising to just 10.7% in 2007 with 130,542 sales. Renault-Samsung sold 117,204 units and Ssangyong 60,615 units.
Import sales gain ground
The import sector is also moving ahead strongly, albeit from a low level. The Korean Automobile Importers and Distributors Association expects sales of imported passenger vehicles to reach a record 62,000 units this year – or 5% of total PV sales. This compares with just 6,329 units in 2000. More brands are entering the market this year, including Toyota, Mitsubishi and Nissan, with the Japanese overall vying for a greater role in this market.
Tony Pugliese
